China’s special administrative region of Hong Kong is going to trial а digital version of its dollar as early as this year, in preparation for eventual roll-out. The territory is trying to catch up with those that are already launching central bank digital currencies, including the People’s Republic with its digital yuan project.
For Q4, trials of digital Hong Kong dollar are planned
In the last months of this year, Hong Kong will begin to test a new currency, the eHKD. This digital version of the Hong Kong dollars, is being tested in Hong Kong. As reported by South China Morning Post, the Hong Kong Monetary Authority announced that the trial will be made possible by legislative changes and the construction of digital infrastructure needed to support it.
After consultations to collect feedback about potential demand and privacy issues, the pilot phase will be completed. Howard Lee is the deputy chief executive at the HKMA. He plays the role as a central bank.
eHKD may not yet be a viable use case. However, given the results from our research and feedback from international development and market consultation, we believe that the HKMA can start paving the road for eHKD implementation. We will launch eHKD soon.
A high-ranking official noted also that CBDCs have been launched in many countries. Participants at the consultations by the banking authority voiced concerns about Hong Kong’s inability to keep up with the international trend.
Selected banks and payment service providers will be involved in the trials. Lee explained that these entities will test the use of digital currency by their staff and clients. “The purpose of introducing the e-HKD is to provide more choice for the customer,” the deputy CEO added. He also emphasized that the move will not affect Hong Kong’s three note-issuing banks.
HKMA will Set a Timeline After Testing for e-HKD
Colin Pou, executive director of financial infrastructure for the HKMA, stated that the Hong Kong Monetary Authority (HKMA) will determine the launch timeline after the pilot phase. In June 2021 the regulator announced the CBDC plan as part of Fintech 2025. The whitepaper was published in October, and consultations closed in May.
Many central banks from around the world are studying digital currencies, and have taken steps towards creating their own. The People’s Bank of China (PBOC) has been running pilot programs for its digital yuan (e-CNY) in a number of cities and recently announced the expansion of the pilot area in four of them to the province level.
Howard Lee, an earlier in the month, revealed that Hong Kong also has conducted smaller-scale testing with the eCNY. Last summer, the region’s financial authorities said they will link the digital yuan to its domestic payments system. The HKMA, in addition to its cooperation with PBOC has also been working closely with central banks from Thailand and the United Arab Emirates for cross-border CBDC payment.
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