Tokens. Crypto. Central bank digital currency. The money of the future. Whatever name you know it by, you’ve likely heard about it in some context over the past few years. Whether from a play-to-earn blockchain game, your friend’s cousin who “is into crypto,” or a media outlet talking about digital currency, the world is going cashless.
In this article, however, we’re talking about just part of the world — Southeast Asia — a diverse region of 11 countries with over 650 million people, each with its own unique currencies and exchange rates. Despite challenges with remittance and frustrating fees associated with moving money from one point to another, the existing system has proven functional. However, with the rise of digital payments and the increasing adoption of blockchain technology, discussions have emerged around the potential for a single digital currency for the region. While the benefits of a cashless future in Southeast Asia are considerable, there are also significant challenges to address.
Benefits of a single digital currency
Imagine for a moment that you’re driving through a maze of currency conversions. The journey is fraught with twists and turns, with each change in direction adding to the confusion. It’s enough to make even the most seasoned traveler dizzy.
But what if there was a way to bypass this labyrinth altogether? A single digital currency in Southeast Asia would do just that, simplifying cross-border transactions and eradicating the need for currency conversions. This would result in increased efficiency and lower transaction costs, like a straight highway unencumbered by detours.
And it’s not just about the ease of transactions. With digital currencies, security and privacy are front and center. In a world where cyber-attacks and data breaches are becoming increasingly prevalent, digital currencies offer a protective shield against such threats. It’s like putting on a suit of armor before venturing out into the world — a sense of security that can’t be matched by physical currency.
Moreover, the implementation of a single digital currency in Southeast Asia would provide unprecedented transparency and traceability in financial transactions. The cloak of secrecy that shrouds financial transactions today would be lifted, reducing the potential for money laundering and other illicit activities. It’s like turning on the lights in a dark room — everything is suddenly visible, and any attempts to hide are foiled.
Challenges to adopting a single digital currency
However, the adoption of a single digital currency in Southeast Asia would also pose significant challenges. The first challenge would be getting all countries in the region to agree on a single currency. Each country has its own political and economic interests, and it may be difficult to find a common ground that benefits all parties involved. Additionally, there are concerns about the potential loss of sovereignty that could come with a single currency, particularly for countries with strong currencies.
The transition to digital currencies in Southeast Asia is like setting sail on a voyage to an uncharted land. The promise of a cashless future is alluring, but there are hidden shoals and treacherous currents lurking beneath the surface.
The development of a digital currency system in Southeast Asia faces a significant obstacle in the form of technical infrastructure. This infrastructure is crucial to ensure the stability and efficiency of the system, much like sturdy pillars are necessary to support a bridge. However, countries in the region often have limited access to high-speed internet and reliable power, which can hamper efforts to build a solid foundation for a digital currency system. The internet penetration rate in Southeast Asia is as high as over 70% in all countries except for Laos, Myanmar, and Timor-Leste, but this is solely internet penetration, and not necessarily considering factors such as bandwidth rates or reliability.
The lack of proper infrastructure and networks can pose a serious risk to the success of a digital currency system in Southeast Asia. It may lead to issues like slow transaction speeds, high latency, network congestion, and power outages that can disrupt the system’s functioning. Without a robust infrastructure, the digital currency system may not be able to keep up with the demands of a modern economy and could face difficulties in gaining widespread adoption.
Therefore, it is important to address the infrastructure challenge as part of any effort to establish a digital currency system in Southeast Asia. Governments, private sector entities, and international organizations need to work together to ensure that the necessary technical infrastructure is in place to support such a system. This can involve investing in high-speed internet, a reliable power supply, and advanced network technologies, among other measures. By doing so, the region can lay the groundwork for a stable and efficient digital currency system that can contribute to economic growth and financial inclusion.
And let’s not forget about security concerns. With cyber-attacks and hacking attempts becoming increasingly prevalent, the possibility of a digital currency system being compromised is a real and pressing issue. It’s like trying to sail into a storm without any life rafts. Without the proper security measures in place, a digital currency system could be sunk by malicious actors before it even gets off the ground.
Digital currencies being adopted in Southeast Asia
Despite these challenges, there are already real-world examples of digital currencies being adopted in Southeast Asia. Singapore, for example, has launched a blockchain-based digital currency called Project Ubin. The currency is designed to facilitate cross-border transactions and reduce settlement times, and it has the potential to serve as a model for other countries in the region.
Another example is the digital currency initiative launched by the Central Bank of the Philippines. The initiative, called Digital Peso, aims to improve financial inclusion and reduce the cost of financial transactions. The Digital Peso is expected to launch in the second half of 2023.
The prospects of a single digital currency for Southeast Asia present a tantalizing vision of heightened efficiency, lower transaction costs, and beefed-up security and privacy measures. However, these advantages come with their fair share of concomitant challenges, including the need for political consensus, adequate technical infrastructure, and tight security measures.
A unified digital payment system as an alternative to a single digital currency
At the very least, it’s advisable for Southeast Asian nations to consider adopting a unified digital payment system if agreement on a single digital currency proves elusive. The current proliferation of digital payment options across the region, including Alipay and WeChat Pay in China, GrabPay, GoPay, OVO, and DANA in Indonesia, GCash and PayMaya in the Philippines, and Momo and ZaloPay in Vietnam, can be overwhelming for users.
Despite efforts to connect different payment systems (such as Alipay’s connection of local wallets, Singapore’s PayNow, and India’s UPI), the current situation remains fragmented and unclear.
Moreover, digital payment platforms such as Google Pay, Apple Pay, and PayPal are accepted in some Southeast Asian countries but banned in others. For example, regulatory changes aimed at combating money laundering mean that some of the services offered by PayPal are no longer available to foreigners in Thailand. This lack of consistency adds to the confusion and inconvenience for users.
Therefore, a region-wide digital payment system could provide a more streamlined and convenient option for consumers and businesses alike. This would require close cooperation between governments, regulators, and private sector entities to establish a secure and reliable system that meets the needs of all stakeholders. By doing so, Southeast Asia can create a more inclusive and connected digital economy that benefits everyone.
Creating a more inclusive and connected digital economy in Southeast Asia
While there are a handful of digital currency initiatives already underway in the region, the implementation of a single digital currency for the entirety of Southeast Asia is, at this point, still a hypothetical scenario. Regardless, it is evident that the region is charting a path toward a cashless future, and digital currencies will undoubtedly wield substantial influence in the course of this transformation.
Imagine strolling through the vibrant streets of Southeast Asia, stopping at a food cart to indulge in some mouthwatering Pad Thai or Nasi Goreng, and paying with SEA tokens or Mekong Money (or whatever creative name you can come up with, let us know in the comments!) The payment revolution is coming, perhaps not in the next ten years or so, but if we’re lucky, we might see it in this lifetime.
All opinions expressed in this piece are the writer’s own and do not represent the views of KrASIA. Questions, concerns, or fun facts can be sent to degen@kr-asia.com.