
One of the most significant financial developments to be recorded is the launch of central bank digital currency (CBDC) by central banks around the world. Hong Kong has now joined the group of nations pursuing advanced research and evaluating of their individual CBDCs, which also includes Nigeria, China, Japan, and India. This week, the Hong Kong e-HKD CBDC entered its pilot phase so that its use cases could be accessible and properly tested prior to its commercial roll out.
CBDCs, which were developed on blockchains, are digital versions of fiat currencies that do away with the necessity for paper-based physical notes while also storing the specifics of every transaction in an irreversible format on the blockchain.
The pilot programme for the e-HKD CBDC was officially launched this week by the Hong Kong Monetary Authority (HKMA).
Tokenized deposits, full-fledged transactions, programmable transactions, offline transactions, settlement of Web3 transactions, and settlement of tokenized assets are just a few of the potential use cases for Hong Kong’s CBDC that will be explored in the coming months by the financial authorities of Hong Kong in collaboration with industry leaders.
An official blog post by the HKMA stated that, “Through this iterative process, the outcomes and insights gained from each pilot would help enrich the HKMA’s perspective and refine the HKMA’s approach to the possible implementation of e-HKD. The HKMA is not yet at a point where a firm decision can be made to introduce e-HKD.”
Hong Kong has invited a total of sixteen companies from the financial, technological, and payment processing industries to take part in its CBDC trials.
At the gathering where the HKMA introduced the launch of the e-HKD, the heads of these 16 groups all disclosed their plans to test the CBDC as part of its trial procedure.
The HKMA’s Chief Executive, Eddie Yue, stated in the blog post that, “We are excited to kick-start the e-HKD Pilot Programme. By fostering government-industry-academia collaboration in CBDC research, we aim to ensure the relevance of our research and development efforts, and enable the translation of such outcomes into viable business opportunities.”
The HKMA hopes to boost government involvement in the CBDC trials in the upcoming months. The HKMA will also create a CBDC Expert Group made up of academics and researchers from nearby universities.
Hong Kong has left it up to the banks to discuss and determine whether they want to retain the e-HKD decentralised, where the CBDC would be dispersed in small fractions away from a central, authoritative place, or centralised, under their control.
Hong Kong wants to keep the process more in the hands of the authorities, in contrast to the UK and the US, who have adopted a more democratic approach and welcomed proposals on CBDCs from their citizens.
The nation has also updated its Anti-Money Laundering (AML) & Counter-Terrorist Financing (Amendment) Bill 2022 to add crypto exchanges as well, in light of the increased interest in cryptocurrencies among its residents.