Hong Kong Monetary Authority announces trial of e-HKD CBDC

The Hong Kong Monetary Authority (HKMA) has announced a trial of its CBDC, the e-HKD, allowing the public to be able to shop, dine out and make money transfers with the digital currency.

HKMA announces trial of e-HKD CBDC

Some 16 banks and payment companies will select small groups of their clients to test six potential uses for the e-HKD – online payments, payments in shops and restaurants, collecting government payouts, tokenised deposits, tokenised asset settlement and Web3 trading and clearing, according to a statement by the HKMA.

“The HKMA considers it the right time to explore a digital currency as residents have become more willing to use online banking services in recent years,” said Howard Lee, deputy CEO of HKMA, in a media briefing before the ceremony.

Hong Kong’s three note-issuing lenders, HSBC, Standard Chartered Bank and Bank of China (Hong Kong), will take part in the trial.

The de facto central bank will issue a limited amount of the digital money in a controlled experimental environment called a sandbox for the participating companies to test its infrastructure, security and other operational issues.

Test Run

The test run “serves as a tremendous opportunity for the HKMA to collaborate with the industry in exploring innovative use cases and maximising our readiness for a potential e-HKD,” announced Eddie Yue Wai-man, the CEO of the HKMA at the launch ceremony.

HSBC, the largest lender in the city, will take part in two pilot projects, testing e-HKD payments on the campus of the Hong Kong University of Science & Technology (HKUST) and simulating tokenised deposit transactions in collaboration with Visa.

Luanne Lim, CEO of HSBC Hong Kong, said the pilot scheme “will help prepare Hong Kong for a new form of money on the horizon and strengthen our competitiveness in the digital economy.”

The HKMA will announce the results of the pilot in a report in November, Lee said. The authority has not yet confirmed when the e-HKD will be fully rolled out.

The HKMA joins many central banks worldwide that have introduced or are considering introducing a virtual currency. The Bahamas was first out of the blocks, launching a digital coin called the Sand Dollar in October, 2020, while mainland China has rolled out a number of pilot schemes for its digital yuan, the e-CNY.

“Globally, there are about 100 central banks studying digital currency. Hong Kong needs to, as it may need several years to develop a central bank digital currency,” Lee said.

The HKMA first mentioned the plan for a centralised digital currency in June 2021 as part of Fintech 2025, its plan to develop financial technologies.

The authority issued a white paper in October 2021 and completed a one-month consultation in May last year collecting views about privacy and other concerns surrounding the launch of a digital coin.

The e-HKD is just the retail side of Hong Kong’s central bank digital currency (CBDC). On an international level, the HKMA has been working on the “mBridge” project with the People’s Bank of China (PBOC), the central banks of Thailand and the United Arab Emirates, and the Bank for International Settlements (BIS) Innovation Hub Hong Kong Centre to study its use in settling international payments.

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