The Hong Kong Monetary Authority (HKMA) says it will hold back on providing a definite date to launch its retail central bank digital currency (CBDC) until key players have gathered sufficient “experience” to compete favorably in the payment space.
HKMA CEO Eddie Yue said initial experiments with a retail CBDC, e-HKD, have shown promise. Still, the need remains for technological, legal, and societal clarity. The HKMA began its CBDC trial run in May with 16 commercial banks and payment providers to explore a handful of use cases.
“It is still the beginning of the trial process,” said Yue. “We have to find a use case that is better than the current retail payments. Because if you are not either safer, faster, or more convenient, then it will not be doable.”
The central bank executive revealed that while the pilot has explored several use cases, the functionality of programmable payments stands out from the pack. Under this use case, consumer funds may be “ring-fenced” with a merchant or limited to specific scenarios.
Bank of China (Hong Kong) has led the study with programmable payments, allowing select users to use the test CBDC to pay for gym memberships, healthcare, and spa sessions.
Other potential use cases for the CBDC include its deployment in tokenized deposits and tokenized assets. Already, the HKMA has indicated a desire to dabble in tokenization after the initial wins from its recently completed Project Evergreen, a bond issuance project using blockchain.
While the CBDC usage faces an uphill task on the domestic front, the HKMA intends to explore its usage in cross-border payments. The HKMA has participated in the Bank for International Settlements (BIS) mBridge pilot, which Yue says is set to release a minimum viable product (MVP) by 2024.
Following the successes of the first pilot, the HKMA says the project is willing to onboard new participants, with up to 20 central banks rumored to be keeping close tabs on the developments.
A harmonious relationship with China
Hong Kong and China have been exploring the use of cross-border transactions to improve the state of cross-border transactions between them in recent weeks. In July, it was announced that Chinese tourists visiting Hong Kong will be allowed to use their digital yuan wallets to pay for goods and services at select locations.
Conversely, Hong Kong tourists to mainland China can use the digital yuan in several retail scenarios. The latest upgrade will allow tourists to top up their digital yuan wallets using Hong Kong’s Faster Payment System (FPS) or payment providers like Mastercard (NASDAQ: MA) or Visa (NASDAQ: V).
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.
Watch: Utilizing sovereign nodes for CBDCs & micropayments
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