The Hong Kong Monetary Authority (HKMA) has begun tests of its central bank digital currency (CBDC), called e-HKD, five months after releasing the currency’s whitepaper in December 2022.
Then, the authority also outlined its vision of the CBDC without giving timelines for when the pilot will begin.
Hong Kong Launches CBDC Pilot Program
The pilot project would include 16 banks and payment processors based on the latest details. The central bank will release a fixed amount of e-HKD where participants will test the effectiveness of the currency, examining whether it can be useful to the city-state.
Notable participants are three note-issuing banks: HSBC, Standard Chartered, and Bank of China and Hong Kong (BOCHK).
The pilot is designed to analyze certain criteria, such as full-fledged and offline payments, tokenized deposits, settlement of blockchain transactions, and tokenized assets.
Breaking🚨: Hongkong🇭🇰 Monetary Authority (HKMA) announced the launch of the CBDC (e-HKD) pilot program.
A total of 16 firms have been selected for the pilot program.
Check out potential use cases of e-HKD in the next tweet.
1/2 pic.twitter.com/JPFqNNMujU
— KoinX (@getkoinx) May 18, 2023
It will take roughly six months until the authority releases its findings in November. However, as currently designed, the e-HKD is a digital solution for retail customers.
It will be accessible to all residents of the city-state. It is so because the CBDC is a digitized form of legal tender fully backed by the government of Hong Kong and regulated by the HKMA.
According to Howard Lee, the deputy CEO of the authority, the launch of the CBDC is happening at the right time, as the city’s residents are increasingly open to using online payment methods. Lee stated the following regarding the announcement:
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.
As such, conducting tests on the digital version of the Hong Kong Dollar will not only serve to foster collaboration with traditional payment service providers but also encourage the exploration and release of innovative use cases that “maximizes the authority’s readiness” for the CBDC.
Eventual incorporation of the e-HKD, the CEO of HSBC Hong Kong, Luanne Lim, adds, will strengthen local banks’ competitiveness.
Hong Kong’s CBDC Partnership
In September 2020, the HKMA partnered with Ethereum venture studio, ConsenSys, to handle cross-border transactions between Hong Kong and other sovereign authorities like Thailand as part of the CDBC project.
Three years later, in May 2023, the authority collaborated with Ripple, a blockchain company, to showcase a real estate asset tokenization solution for the e-HKD project.
At the moment, Hong Kong is concurrently working with several central banks, including the People’s Bank of China (PBoC), the Bank for International Settlements (BIS) Innovation Hub Hong Kong Centre, and the central banks of the United Arab Emirates and Thailand under the “mbridge” project. The objective is to study how CBDCs can be leveraged in international settlement.
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