Hong Kong, a special administrative region of China, will pilot a digital version of the dollar as early as this year in preparation for its eventual rollout. The region is trying to catch up with those that have already launched central bank digital currencies, including the People’s Republic of China with its digital renminbi project.
A digital Hong Kong dollar trial is planned for the fourth quarter
Hong Kong intends to begin trials of a digitalized version of the Hong Kong dollar, called the e-HKD, in the remaining months of the year. The Hong Kong Monetary Authority (HKMA), quoted by the South China Morning Post, announced that the trial will be facilitated by the adoption of legal amendments and the creation of the digital infrastructure necessary to support the project.
The pilot phase follows consultations conducted to gather feedback on potential demand, privacy aspects, and other issues that may arise in connection with the issuance of a central bank digital currency (CBDC). Howard Lee, Deputy Chief of HKMA, which serves as the central bank, elaborated as follows.
While the use case for e-HKD may not be imminent, in light of our research findings, market consultations and feedback from international developments, the HKMA has begun to pave the way for e-HKD implementation and will proceed towards e-HKD launch in the future.
The senior official also noted that a number of jurisdictions are already considering launching CBDC. Participants in the consultations held by the banking authorities expressed concern that Hong Kong is lagging behind and needs to catch up with international trends.
The pilot will involve selected banks, payment providers, and technology companies. These entities will study the use of the digital currency among their employees and a small number of customers, Lee detailed. The vice president added, “The purpose of implementing e-HKD is to give customers more choices.” He also stressed that the move would not affect Hong Kong’s three note-issuing banks.
HKMA to set timeline for e-HKD launch after testing
Colin Pou, executive director of financial infrastructure at the HKMA, said that after a pilot phase, the HKMA will set a timeline for the launch of e-HKD. The regulator first announced the CBDC plan in June 2021 as part of its Fintech 2025 strategy; a white paper was issued in October and consultations concluded in May.
Dozens of central banks around the world are studying digital currencies and taking steps to create their own. The People’s Bank of China (PBOC) has pilot programs for the digital renminbi (e-CNY) in a number of cities and recently announced the expansion of four of those pilot areas to the provincial level.
Hong Kong has also conducted a small-scale test of e-CNY this year, Howard Lee revealed earlier this month. Last summer, the region’s financial authorities announced that they would link the digital renminbi to the domestic payment system. In addition to working with the Bank of China, the Hong Kong Monetary Authority is also working with the central banks of Thailand and the United Arab Emirates on cross-border CBDC payments.
Image Credits: Shutterstock, Pixabay, Wiki Commons, weerasak saeku.