As we know, Central Banks around the world are, for the majority, looking at running pilots or proof of concepts on CBDC.
The Hong Kong Monetary Authority (HKMA) has now released a position paper titled “e-HKD: Charting the Next Steps” to set out its policy stance on retail Central Bank Digital Currency (CBDC), i.e. e-HKD, and outline its next steps.
As part of its “Fintech 2025” strategy to future-proof Hong Kong in terms of CBDC readiness, the HKMA has examined the prospect of issuing e-HKD in Hong Kong from both the technical and policy perspectives. Two rounds of market consultation, one on high-level technical design and one on key policy and design issues, were conducted.
In total, 75 responses were received1 during the consultation. Overall, the respondents are supportive of the e-HKD initiative and believe that e-HKD has the potential to make payments more effective while supporting the digital economy.
At the same time, the respondents also pointed out the need to further examine issues such as privacy protection, legal considerations, and use cases. Taking into account the findings of the study and the feedback received, the HKMA will start paving the way for possible implementation of e-HKD in the future.
A three-rail approach will be adopted:
- Rail 1 aims to lay the technology and legal foundations for supporting the implementation of e-HKD. Specifically, a plan will be formulated for developing the wholesale layer of the two-tier e-HKD system. In addition, the HKMA will identify and examine areas to prepare for legislative amendments, with a view to enabling the issuance of a digital form of fiat currency with legal tender status in Hong Kong.
- Rail 2, which will run in parallel to Rail 1, the HKMA will take deep dives into use cases as well as application, implementation, and design issues relating to e-HKD. It will also conduct a series of pilots in close collaboration with various stakeholders to gain actual experience.
- Rail 3 is concerned with launching e-HKD. It will consolidate the outcomes of Rail 1 and Rail 2 for more thorough implementation planning, and will set the timeline for launching e-HKD. The progress of Rail 3 will depend on the actual progress made under Rail 1 and Rail 2, as well as the pace of relevant local and international market development.
In the Nordics, the central bank of Norway has released the open source code for its CBDC’s sandbox and the bank’s Ethereum technology as a core infrastructure.
Through a specific design option, the sandbox interface enables interaction with the test network and offers a suite of features such as minting, burning, and transferring ERC-20 tokens, as explained by the Norges Bank’s official CBDC partner, Nahmii, in a blog post.
In addition to deploying the appropriate smart contracts and access controls, the Norges Bank sandbox includes a custom frontend and network monitoring tools like BlockScout and Grafana. The front end also shows a filterable summary of transactions on the network, Nahmii noted.
The Norges Bank took to Twitter on Friday to mention that Norway’s CBDC prototype infrastructure is based on Ethereum technology.
The central bank previously made a reference to Ethereum in a CBDC-related blog post in May.
The Norges Bank stated that the Ethereum cryptocurrency system is expected to provide a “core infrastructure” for issuance, distribution and destruction of digital central bank money, which is also referred to as DSP. “The prototype will be used to test a number of the important features for DSP,” the bank said.
As previously reported, the Norges Bank officially announced plans to conduct CBDC tests in April last year, expecting to find a preferred CBDC solution by trialling different designs for a period of two years.