The Hong Kong Monetary Authority (HKMA) has launched a pilot program to test its central bank digital currency (CBDC), known as e-HKD. The project involves 16 banks and payment processors, including HSBC, Standard Chartered, and Bank of China and Hong Kong (BOCHK). The central bank will release a fixed amount of e-HKD for participants to test the effectiveness of the currency. It will analyze various criteria, such as full-fledged and offline payments, tokenized deposits, settlement of blockchain transactions, and tokenized assets. The authority will release its findings in November, after which e-HKD will be accessible to all residents of the city-state. The CBDC is a digitized form of legal tender fully backed by the government of Hong Kong, regulated by HKMA.
According to Howard Lee, the deputy CEO of the authority, the launch of the CBDC is happening at the right time as residents have become increasingly willing to use online banking services. He added that testing the digital version of the Hong Kong Dollar will not only foster collaboration with traditional payment service providers but also encourage the exploration and release of innovative use cases that maximize the authority’s readiness for the CBDC.
The CEO of HSBC Hong Kong, Luanne Lim, believes that the eventual incorporation of e-HKD will strengthen local banks’ competitiveness. In September 2020, 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 CBDC project. HKMA also collaborated with blockchain company Ripple in May 2023 to showcase a real estate asset tokenization solution for the e-HKD project.
Hong Kong is working with several central banks, including the People’s Bank of China, the Bank for International Settlements Innovation Hub Hong Kong Centre, and the central banks of the United Arab Emirates and Thailand under the “mbridge” project to study how CBDCs can be leveraged in international settlement. The e-HKD is a promising digital currency that could transform the payment landscape in Hong Kong, but further testing is needed to ensure its viability and security.