Banking Giant HSBC Slams Cryptocurrencies, But Applauds CBDCs For This Reason

HSBC, a British multinational investment bank and a financial services firm, has scrutinized cryptocurrencies and stablecoins, claiming the lack of regulations in the space pose threats to investors. On the contrary, the bank adored CBDCs as a form of digital money that can spur economic growth.

In a recent report, titled “New forms of digital money could spur growth,” HSBC acknowledged Central Bank Digital Currencies as a banking innovation. The report noted that CBDCs are transparent and stable, therefore do not pose any threat to customers.

CBDCs, also known as govcoins are the virtual version of fiat currencies and are issued by central banks. These govcoins have recently burst in popularity, with numerous countries like the UK exploring the potential of such a digital currency. China, which started exploring an official electric currency back in 2014, now leads the CBDC race.

HSBC believes that CBDCs can help stimulate additional economic growth as they facilitate near-instant cross-border payments and settlements. The bank also pointed out that govcoins can reduce the cost of issuing and trading bonds and other forms of securities, spurring innovation across the financial sector.

Nevertheless, HSBC insisted that CBDCs won’t gain mainstream adoption unless they prove to be “safe, efficient, and genuinely transformative.” The bank also mentioned the privacy concerns associated with CBDCs, asserting that govcoins shall meet consumer expectations for protection and data.

Given their structures, CBDCs give governments a controlling position over money. They can allow authorities to monitor, track, and even record all the financial data of users.

However, HSBC believes that choosing the right model for CBDCs is the solution to those dilemmas. “Like many other stakeholders, HSBC believes a hybrid model – sometimes called a two-tier model because the CBDC itself is a claim against the central bank but commercial banks provide the payment services and account management activity – is by far the best design option,” the bank proposed.

HSBC Scrutinizes Cryptocurrencies and Stablecoins

While insisting that CBDCs are the best form of digital money, HSBC slammed stablecoins and cryptocurrencies. The bank said that the lack of regulatory clarity around the space makes these digital currencies an insecure medium of exchange.

HSBC’s skepticism towards crypto-assets comes as no surprise since Noel Quinn, chief executive at HSBC, had previously said Bitcoin “is not for us.” Quinn asserted that they have no plans of dabbling in crypto since the market is largely unregulated and is exposed to extreme volatility.

“Given the volatility we are not into Bitcoin as an asset class, if our clients want to be there then of course they are, but we are not promoting it as an asset class within our wealth management business. For similar reasons we’re not rushing into stablecoins,” Quinn said.

Text source: ZyCrypto

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