Hong Kong to study e-HKD potential in retail central bank digital currency

The Hong Kong Monetary Authority (HKMA) has said it is looking into the prospects of having a local, retail central bank digital currency.

HKMA, the de facto central banking authority in the Hong Kong Special Administrative Region, revealed its “Fintech 2025 Strategy” in a press conference on Tuesday. It’s a high-level strategy for driving financial technology development in the city.

As part of the fintech strategy, the HKMA said it’s expanding its research and development efforts on central bank digital currencies (CBDC) from previously just wholesale to potentially something that could be retail facing, similar to the e-CNY across the border in mainland China.

“In addition to the continued effort on wholesale CBDCs, the HKMA has been working with the Bank for International Settlements (BIS) Innovation Hub Hong Kong Centre to research retail CBDCs and will begin a study on e-HKD to understand its use cases, benefits, and related risks,” the HKMA announced in a press conference summary online.

Although the details of the Fintech 2025 plan is not yet fully available, a CBDC will be one of the five priorities under the high-level strategy.

This is the first time that the authority in Hong Kong has expressed its intention to study the potentials of the e-HKD in a retail use case scenario. It also comes amid ongoing internal tests of the e-CNY in Hong Kong to facilitate cross-border payment for Hong Kong and mainland China residents.

“The HKMA will also continue to collaborate with the People’s Bank of China in supporting the technical testing of e-CNY in Hong Kong with a view to providing a convenient means of cross-boundary payments for both domestic and mainland residents,” the central banking authority added.

The HKMA’s work around CBDC had so far been mostly focused on wholesale use cases. It announced in February that it kicked off the second phase of the so-called Project Inthanon-LionRock with several central banks, including the People’s Bank of China. It’s a joint project aiming to settle cross-border payments through the blockchain technology by using what’s called a “multi-CBDC bridge.”