💰 MONGOLIA JOINS CBDC RACE | TUGRIK WEAKENING | NOVEMBER POLITICS

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“Her singing rings in the ears like the breaking of crystal glasses… The compass of this extraordinary Mongolian singer’s voice can only be measured by the sky.” - Mainichi Daily News, 1992.

🤔 DID YOU KNOW?

💰 CBDC IS HERE!

With the government including the central bank digital currency (CBDC) experiment in its 2023 monetary policy agenda, Mongolia is stepping into the global CBDC race.  

A representative of the Central Bank of Mongolia (BOM) told Inside Mongolia that the relevant working group is already established and preliminary research has begun. The BOM is particularly interested in the following design features:

• Anonymity: Does CBDC need to be anonymous to a certain extent? 

• Interest-bearing: Does CBDC need to be interest-bearing? 

• Account hold: Whether to impose a cap or limit on individual holdings? 

• Money Laundering: Can CBDC be used to oversee and prevent money laundering and financing of terrorism?

Mongolia is starting late as over 100 countries are already exploring the possibilities of introducing CBDC. Mongolia’s two biggest trade partners, China and Russia, are also testing and implementing their CBDCs in hopes of promoting its currency value and introducing a new international cross-border payment alternative. 

Moreover, 11 countries fully launched a digital currency - all are small markets. Emerging markets are keen to implement CBDC due to its potential advantages and also ease of implementation. “Given the right design, a CBDC can enhance financial inclusion, facilitate improved financial responsibility, reduce tax evasion and strengthen a currency position in its local market as an alternative or in addition to crypto and foreign currencies.” said Jamiel Sheikh, Founder and Managing Director at the CBDC Think Tank.  

It’s easier to implement CBDC in a small market, but there are many lessons to learn and challenges to face. Jamiel added that the first steps the central banks should take are:

• “It is absolutely critical that central banks develop deep internal competencies around digital currencies and not rely entirely on vendors to establish a vision for the future of money in the country. This includes understanding alternatives and options, such as blockchain, stablecoins, decentralized finance, and modern payment infrastructure. Developing these competencies includes internal education, consultation with experts, and developing proof-of-concept projects where the success criteria are research value. This approach will help inform and crystallize a clearer vision for the country at a significantly reduced level of risk.”

Considering Mongolia’s comprehensive and inclusive domestic payment system, it’d be no problem to introduce and adapt CBDC domestically. After all, 98% of Mongolian households have cell phones and 80% - access to the internet. The bigger question will be how Mongolia can use CBDC to improve its cross-border payment system, which still remains a big challenge to address.

📉 DATA STORY

Although other currencies have started to recover in the beginning of November, the Mongolian tugrik still remains weaker than ever before. As a result, our foreign exchange reserves are depleting, and it’s becoming more and more expensive to import goods, which leads to even less exchange reserves. With the government’s plan to attract more investment and tourist inflows in the coming years, the situation will hopefully resolve itself without catastrophic consequences.

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🤝 NOVEMBER POLITICS

President U.Khurelsukh successfully concluded state visits to China and Japan last week, holding fruitful talks with the respective heads of state. Here’s what you should know:

Mongolia-China:  trade turnover to be raised to $20 billion within 5 years

• In 2021, total trade turnover between Mongolia and China made up $5.1 billion.

The parties agreed to further deepen cooperation within the Comprehensive Strategic Partnership by gradually increasing exports of mineral products from Mongolia to China and accelerating the realization of joint projects.

The sides also discussed border transportation issues, such as the need to speed up the construction of the Gashuun Sukhait-Gants Mod railway, connect the Khangi-Mandal border checkpoint by rail, as well as upgrade the Zamiin-Uud-Erlian border control infrastructure.

Mongolia-Japan: strategic partnership program renewed

2022 marks the 50th anniversary of the establishment of diplomatic relations between the two countries, making the Mongolian president’s visit to Japan a symbolic celebration of bilateral cooperation. This was the first state visit from Mongolia to Japan since 2010.

The sides renewed the previous medium-term program of partnership, establishing a 10-year Special Strategic Partnership for Peace and Prosperity aimed at deepening cooperation in politics, trade, investment and human-centered development.

In terms of energy cooperation, Japan agreed to provide economic aid for certain projects, underlining that the energy sector plays an important role in the countries’ bilateral relations.

The “1000 engineers” program dedicated to preparing highly qualified Mongolian professionals in Japan was set to be continued as well. 

One Billion Trees

Xi Jinping and Fumio Kishida expressed their support for Mongolia’s “One Billion Trees” initiative, agreeing to participate in joint projects aimed at combating global warming and desertification. 

Both visits showed Mongolia as a country that’s able to play with the big boys of global politics. Though, if we think about it, there’s no other option anyway - sandwiched between Russia and China, Mongolia is bound to learn to deal with geopolitical giants.  

🏃‍♀️ QUICK STORIES

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📌 Draft Law on Casino to be submitted to parliament. Draft Laws on Casino, Gambling, Lottery and Horse Race Betting are soon to be sent to the Mongolian parliament for final adoption. The endeavors to legalize gambling come amid the government’s efforts to promote tourism

📌 Golomt Bank successfully closes record-setting IPO. The bank’s initial offering saw an oversubscription of 148% with orders worth ₮174.8 billion in total - a record amount in the history of the Mongolian Stock Exchange. 

📌 Two additional crypto exchanges registered. The Financial Regulatory Commission announced the official listing of Capex and Denonde at its 21st regular meeting on November 25, making the total number of registered crypto exchanges in Mongolia 11. 

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