The Hong Kong Monetary Authority (HKMA) has initiated the second phase of its electronic Hong Kong dollar (e-HKD) pilot program, encouraging industry participants to propose potential use cases for the central bank digital currency (CBDC).
Announced on March 14, the launch of the second phase aims to further explore the possibilities offered by the digital Hong Kong dollar. Building upon the groundwork laid in the initial phase, the focus will encompass key areas such as programmability, tokenization, and atomic settlement. Additionally, the HKMA intends to delve into new potential use cases not previously addressed. Market participants are invited to apply for involvement in the pilot, with submissions due by May 17. The HKMA anticipates the second phase to extend until mid-2025, allowing ample time for participants to test and assess their proposed use cases thoroughly.
Guidelines have been provided by the financial regulator for interested parties seeking to partake in the pilot. Evaluation criteria will center on factors such as the innovative aspects or distinctiveness of existing market products, impact on consumer experience, readiness for market testing, compliance with regulatory frameworks, and the potential to optimize the use of e-HKD within Hong Kong.
The CBDC initiative was launched in 2021 as part of Hong Kong's overarching "Fintech 2025" strategy. The central bank announced its CBDC roadmap on June 8, 2021, as part of broader government efforts to promote digital finance adoption within the Special Administrative Region by 2025.
Having commenced research on CBDC since 2017, the HKMA underscores its commitment to enhancing Hong Kong's readiness to issue CBDCs across wholesale and retail sectors. Key industry players, including payment processor Visa, are actively engaged in the e-Hong Kong dollar pilot. Notably, Visa concluded a successful digital Hong Kong dollar pilot test with local banking giants HSBC and Hang Seng Bank on November 1. The pilot involved the tokenization of deposits, leveraging blockchain ledger technology to mint funds supported by a robust balance sheet.
