China’s central bank and the Hong Kong Monetary Authority, or HKMA, are in the preliminary stages of piloting the digital yuan for cross-border payments — underscoring another key development in the rollout of a central bank digital currency, or CBDC.
In a media release that appeared on the HKMA website on Friday, chief executive Eddie Yue provided an update on the ongoing work surrounding cross-border payments. He indicated that HKMA is in dialogue with the People’s Bank of China, or PBoC, to begin pilot testing the e-CNY.
“The HKMA and the Digital Currency Institute of People’s Bank of China are discussing the technical pilot testing of using e-CNY, the digital renminbi issued by the PBoC, for making cross-border payments, and are making the corresponding technical preparations.”
Hong Kong and mainland Chinese tourists could greatly benefit from e-CNY, Yue said, because it represents the same value as cash already in circulation. And because the yuan is already used in Hong Kong, a digital equivalent would be a matter of convenience.
China continues to be at the forefront of CBDC development, with its digital yuan pilots processing $300 million worth of transactions as of early November. The first pilot projects were rolled out across four major cities in April before expanding to nine metropolitan areas.
As for Hong Kong, the Special Administrative Region has been exploring potential use cases for CBDCs for at least the past three years. As Yue noted, HKMA launched a joint research project with the Bank of Thailand in 2019 to address various concerns related to cross-border payments and digital currencies. Yue said this project has entered its “second stage,” which looks at the operability and scalability of cross-border CBDC participation.
In the long term, Yue said the goal is to build an integrated cross-border payment platform for the region:
"From a longer-term perspective, we have a good chance of building a regional cross-border payment platform by riding on the global trend of strengthening cooperation in cross-border payment."