The Hong Kong Monetary Authority (HKMA) today released an official report examining the potential of a retail-focused central bank digital currency (CBDC), the Hong Kong dollar digital (e-HKD).
According to the document, the HKMA will seek to understand “potential architectures and design alternatives” from a technical and regulatory point of view to create a two-tier system – the first is designed for a “central bank that issues and acquires” CBDCs “and focuses second, on the retail trade at “commercial banks that sell rCBDC or CBDC-supported cryptocurrencies and put them into circulation.”
Hong Kong began its investigation into CBDCs in 2017 with the LionRock project. He started a seven-month partnership with the Bank of Thailand in early 2020 to “explore the potential of a wholesale CBDC for cross-border payments.”
This initiative evolved into the Multiple CBDC Bridge in February 2021 after establishing the Central Bank of the United Arab Emirates and the Digital Currency Institute of the People’s Bank of China. This “M-CDBC” aims to provide a proof-of-concept model for a unified payment network using distributed ledger technology.
In June of this year, HKMA announced Fintech 2025, a financial technology initiative that will focus on five areas of innovation, including helping central banks adopt CBDC, human resource development professionals, and the initiative launched today. HKMA Chief Executive Officer Eddie Yue said:
“The whitepaper marks the first step in our technical research into e-HKD. The knowledge gained from this study, together with the experience gained from other CBDC projects, will help support further review and consideration of the technical design of the e-HKD.
Related: CBDCs Can Cut Cross-Border Remittance Costs In Half: BIS Report
“We also look forward to feedback and suggestions from academia and industry to enrich our perspective,” added Yue.
Although the People’s Republic of China and Hong Kong have enacted a comprehensive ban on all crypto-related activities, it remains ambitious to pursue CBDC and establish itself as a leader in the growing world market.