On Monday, the Hong Kong Monetary Authority (HKMA) released an official white paper exploring the potential of a retail-focused central bank digital currency (CBDC), the digital Hong Kong dollar (e-HKD).
According to the document, the HKMA will seek to understand the “potential architectures and design options” from a technical and regulatory policy perspective, with the ambition of creating a dual-tier system — the first being designed for a “central bank to issue and redeem CBDC,” and the second being retail-centric for “commercial banks to distribute and circulate either rCBDC or CBDC-backed e-money.”
Hong Kong debuted its investigation into CBDCs in 2017 with Project LionRock, and in early 2020, it embarked on a seven-month collaboration with the Bank of Thailand, prospecting the “potential of wholesale CBDC for cross-border payments.”
The initiative soon evolved into Multiple CBDC Bridge in February 2021 following the introduction of the Central Bank of the United Arab Emirates and the Digital Currency Institute of the People’s Bank of China. This “m-CDBC” will aim to use distributed ledger technology to deliver a proof-of-concept model for a unified payments network.
In June of this year, the HKMA announced Fintech 2025, a financial technology initiative focused on five areas of innovation, including offering support to central banks in the adoption of a CBDC, developing a skilled workforce, as well as the initiative introduced today. HKMA chief executive Eddie Yue said:
“The Whitepaper marks the first step of our technical exploration for the e-HKD. The knowledge gained from this research, together with the experience we acquired from other CBDC projects, would help inform further consideration and deliberation on the technical design of the e-HKD.”
“We also look forward to receiving feedback and suggestions from the academia and industry to enrich our perspectives,” Yue added.
Despite issuing a blanket ban on all crypto-related activities alongside Hong Kong, the People’s Republic of China has been consistently ambitious in its pursuit of a CBDC, establishing itself as a prominent leader in the burgeoning global market.