China’s special administrative area of Hong Kong will test a digital version its dollar in the early part of this year. This is to prepare for eventual rollout. It is trying to catch up to those who have already launched digital currency central banks, such as the People’s Republic’s digital yuan initiative.
In the remaining months of this year, Hong Kong will begin to test a currency called e-HKD. This digital version of the Hong Kong dollars, is being tested in Hong Kong. The trial will be made easier by legislative amendments being passed and the creation of the necessary infrastructure to support it, according to the Hong Kong Monetary Authority ( HKMA), quoted by South China Morning Post.
Hong Kong plan to test its digital dollar in Q4 of 2022
After consultations to collect feedback on possible demand, privacy aspects and other issues around the issuance a central bank digital currency ( CBDC), the pilot phase is now in place. Howard Lee, HKMA’s deputy chief executive, explained:
eHKD might not be an immediate use case, but the HKMA will continue to pave the way for eHKD implementation, taking into consideration the results of our study, market consultation, and international development feedback.
A high-ranking official noted that CBDCs are being explored by many jurisdictions. The consultations were held by the banking authority. Participants expressed concern that Hong Kong is behind the international trend and need to catch up.
Selected banks, payment service providers, and tech companies will participate in the trials. Lee explained that these entities will test the use of the digital currency by their employees and clients. Lee explained that the e-HKD was introduced to give customers more options. He stressed that the move would not impact Hong Kong’s three note-issuing bank branches.
Colin Pou, executive director of financial infrastructure at HKMA, stated that the Hong Kong Monetary Authority (HKMA) will determine the timeline for launching e-HKD after the pilot phase. In June 2021, the regulator announced the CBDC plan as part of the Fintech 2025 strategy. In October, a white paper was published and consultations closed in May.
Hundreds of central banks have studied digital currencies around the globe and taken steps to create theirs. The People’s Bank of China has been running pilot programs in a variety of cities for its digital yuan, (e-CNY), and recently announced that the pilot area will be expanded to four more provinces.
Howard Lee, an earlier this month, revealed that Hong Kong also has conducted small-scale tests using the e-CNY in this year’s Hong Kong. The region’s financial authorities announced last summer that they would link the digital Yuan to their domestic payments system. The HKMA has been working closely with the PBOC and other central banks in Thailand and the United Arab Emirates to facilitate cross-border CBDC payments.