The Hong Kong Monetary Authority (HKMA) has released a discussion paper titled, “e-HKD: A policy and design perspective.” The paper laid out the central banker’s thoughts on retail CBDC and invited public opinion.
The HKMA highlighted that it has been studying key issues around the retail CBDC, including the potential benefits and challenges, design considerations such as issuance mechanism, interoperability with other payment systems, privacy and data protection, and legal considerations, as well as use cases.
These include a decline in cash usage, a need to encourage financial inclusion, improving payment system resilience, and supporting innovation. The HKMA maintained that the country’s payment system is strong, and its Hong Kong Dollar (HKD) would render the e-HKD almost unnecessary.
Additionally, the authority also noted multiple challenges in rolling out a retail CBDC. A few include possible impact on commercial banks, cybersecurity risks, and vulnerability to power outages.
However, HKMA Chief Executive Eddie Yue noted in a statement that the paper is a major milestone for the body.
“This Paper marks another milestone in our exploration for the e-HKD… We strongly encourage the public and the industry to take part in this important consultation and share their views with us,” he said.
He added that comments from the general public and digital currency industry participants would go a long way to helping the Chinese special administrative region formulate the best strategy for the retail CBDC.
Hong Kong is still pursuing wholesale CBDC
The HKMA’s portal is open for comments on the twelve discussion questions the paper laid out until May 27. The agency has previously studied the technical aspects of the CBDC, publishing its first paper last October.
The region is also partnering with China to integrate the digital yuan into its payments system. As well as working with the Bank of International Settlements (BIS) and the central banks of China, Thailand, and the UAE to pilot a wholesale cross-border digital payments project—the mCBDC Bridge Project.
Meanwhile, the adoption of digital currencies, including stablecoins, continues to sweep across the region, especially since its neighbor China banned the industry. Forbes reported that the industry is bringing even more financial inclusion to the country.
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