Hong Kong’s central bank has been working with China’s digital currency institute to trial the use of the digital yuan on cross-border payments. This will be the first instance of the central bank digital currency’s use outside China.
In a recent update, the Hong Kong Monetary Authority (HKMA) chief executive Eddie Yue said that the regulator has been working with the People’s Bank of China on the trial. As he noted, despite the advances in digital payments, cross-border payments remain a great pain point. For most people, these payments take days and cost outrageous fees. He believes the digital yuan may be the solution.
He stated, “As the renminbi is already in use in Hong Kong and the status of e-CNY is the same as cash in circulation, it will bring even greater convenience to Hong Kong and Mainland tourists.”
Yue stated that the two central banks have not yet decided on the timeline for the launch of the service. However, he believes that “the launch of e-CNY will certainly offer an additional payment option to those in Hong Kong and the Mainland who need to make cross-border consumption.”
The announcement comes at a time when the PBoC has revealed that it will be conducting a new trial this Friday, December 11. The trial will take place in the city of Suzhou where the bank will select 100,000 people to participate.
According to a report by Japanese newspaper Nikkei, the new pilot program will trial tap payments for the CBDC. This feature allows users to tap their phones together to transfer the digital yuan. It will not require an internet connection, giving the digital yuan an even bigger use case.
The PBoC will send 200 yuan ($31) to the participants, which they can then use to purchase products in local stores. They can also use the digital yuan on JD.com, one of China’s largest online retailers. The retailer will become the first online platform in China to accept CBDC payments.
The Suzhou trial will coincide with Double 12, a shopping event on December 12th which sees most retailers offer customers steep discounts—kind of like the sequel to Singles’ Day. With hundreds of millions of customers flooding local stores this weekend, the PBoC will get to test whether the digital yuan can handle the heavy stress, Nikkei reports.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
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