The Hong Kong Monetary Authority (HKMA) is looking for wider use case scenarios for its central bank digital currency (CBDC). The banking regulator disclosed that the search would include the launch of a series of trials with industry players, South China Morning Post reported.
In an interview, HKMA head Eddie Yue noted that the trials would involve commercial banks and are scheduled to begin sometime in the fourth quarter. He believed that spotting novel use cases for the digital iteration of the local currency are vital to encouraging its mass adoption by the populace.
“Hong Kong’s electronic retail payment system is already very diverse, very convenient and very cheap. If we want the public to adopt the e-HKD, we need to have a suitable use case that can show that the CBDC is superior or more convenient, or cheaper,” Yue said.
The HKMA’s quest for CBDC faces a stern test from the array of digital payments available to the public. The central bank will have to contend with Alipay, WeChat Pay, Octopus, and a large number of digital assets, including stablecoins that residents have adopted.
Benjamin Quinlan, CEO of Hong Kong consultancy firm Quinlan & Associates, stated that the HKMA’s CBDC stands a chance against other privately issued options if it explores payments via smartwatches and allows offline payments with the e-HKFD. Other factors cited by Quinlan include “striking the right balance between privacy and controls” and “winning buy-in from the private sector.”
Early in the year, Yue expressed concerns over creating a retail CBDC on the grounds of technical restrictions and financial limitations during a public consultation amid whispers of a potential marriage with China’s digital yuan.
Hong Kong’s CBDC journey so far
Hong Kong is part of a group of leading countries that have shown enthusiasm for CBDC development despite a slow start. In October 2021, the HKMA released a white paper detailing plans for exploring the possibility of a CBDC and followed it with a public consultation that drew comments from key stakeholders.
Most recently, the central bank took part in the Bank of International Settlements (BIS) Innovation Hub’s pilot for a cross-border CBDC called the Multiple CBDC Bridge (mBridge). The pilot saw the participation of the central banks of Thailand, China, and the United Arab Emirates, which the BIS described as a resounding success.
China, Thailand, and other Asian countries are ramping their efforts for CBDCs in an attempt to stifle the increasing adoption of virtual currencies like Bitcoin (BTC) and Ethereum (ETH).
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