Hong Kong regulator considers retail-focused central bank digital currency

The Hong Kong Markets Authority has been looking into the idea of CBDCs since 2017

Hong Kong harbour                                 
Hong Kong harbour - Photo:Shutterstock
                                

The Hong Kong Monetary Authority (HKMA) has published a white paper titled e-HKD: A technical perspective’ which investigates the idea of a retail focused central bank digital currency (CBDC), the digital Hong Kong dollar (e-HKD).

In June this year, the HKMA announced project e-HKD, a retail or general-purpose CBDC (rCBDC) project that aimed to study the feasibility of the e-HKD. The project involves two parts, one a technology experimentation study, the other a comprehensive study of other legal and policy issues.

The white paper released by the HKMA makes up part of the technology experiment. It explores the “potential architectures and design options that could be applied to the construction of the infrastructure for distributing e-HKD and reports the initial thoughts and findings.”

It also aims to explore the technology solutions “that address the problems of cross-ledger synchronisation, over-issuance prevention and privacy-preserving transaction traceability”.

Hong Kong’s CBDC journey

The HKMA began researching CBDCs under Project LionRock in 2017 and since then has collaborated with other central banks.

In 2019, HKMA and the Bank of Thailand (BOT) jointly initiated Project Inthanon LionRock to look into the potential of wholesale CBDC for cross-border payments. The project then entered its second phase in 2020 and was renamed Multiple CBDC Bridge (mBridge) in February 2021. It was then joined by the Central Bank of the United Arab Emirates and the Digital Currency Institute of the People’s Bank of China (PBoC) and supported by the Bank for International Settlements (BIS) Innovation Hub Centre in Hong Kong.

The knowledge built up from these various projects then opened the doors to the study of the e-HKD, or a rCBDC.

HSBC chief executive backs central bank digital currencies

In September the group chief executive for HSBC, the largest European bank, came out in favour of CBDCs.

In his article New forms of digital money could spur growth, Noel Quinn detailed the advantages CBDCs can bring to the economy and financial systems.

Quinn describes CBDCs as “legal tender backed by a central bank or government authority,” resulting in them being both transparent and stable.

The HSBC group chief executive believes CBDCs can “help to spur further economic growth by making payments and settlements more efficient and cheaper”.

Quinn also argues that CBDCs can “fuel innovation in the financial sector” and are “likely to lower the cost of issuing and trading bonds and other securities”. Additionally, they may also “help with fiscal and monetary policy objectives” as they could offer a way of making “direct transfers to consumers to stimulate demand”.

Further reading: Nigeria’s CBDC website has officially launched

The material provided on this website is for information purposes only and should not be regarded as investment research or investment advice. Any opinion that may be provided on this page is a subjective point of view of the author and does not constitute a recommendation by Currency Com Bel LLC or its partners. We do not make any endorsements or warranty on the accuracy or completeness of the information that is provided on this page. By relying on the information on this page, you acknowledge that you are acting knowingly and independently and that you accept all the risks involved.
iPhone Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with crypto or fiat
iMac Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with crypto or fiat
iMac Image