Hong Kong Launches CBDC Pilot

Hong Kong Partners With Ripple Labs And Other Companies To Launch CBDC Pilot

As the cryptocurrency industry evolves, so does the use of blockchain technology. Hong Kong is one of the first countries to officially launch a central bank digital currency (CBDC) pilot of their fiat currency. The pilot program for the digital Hong Kong dollar, dubbed e-HKD, went live and will be tested with 16 different firms.

This innovative development follows a positive response to consultations on technical and policy aspects. These talks were the main factor that pushed the launch of the CBDC. So, all of the above-mentioned events led to the central bank’s decision to explore the potential of a retail CBDC.

Initially, 16 firms joined the program. Trial tests of these firms will be focusing on six categories:

  • full-fledged payments,
  • programmable payments,
  • offline payments,
  • tokenized deposits,
  • settlement of Web3 transactions,
  • settlement of tokenized assets.

Each category represents a unique side of cryptocurrency/digital currency applications that the program will deeply investigate. As the pilot program continues, we might see Hong Kong discovering new ways to utilize blockchain technology. While the crypto community does not support CBDCs because of their centralized nature, doing research on how to utilize blockchain is a good thing.

The HKMA is closely collaborating with the selected stakeholders to carefully inspect use cases and address design and implementation issues in the broader sense. The list of the financial institutions that are participating in the program includes major global names in different industries. Some of them are:

  • Bank of China,
  • HSBC,
  • Standard Chartered,
  • Industrial and Commercial Bank of China,
  • Fubon Bank and China Construction Bank,
  • Ant Group’s Alipay,
  • Visa,
  • Mastercard,
  • Ripple Labs.

Alipay Testing e-HKD’s Programmable Payment Use Cases

A notable element of the pilot is Alipay’s intention to test the e-HKD’s programmable payment use cases. The HKMA’s move is not only a major move toward the potential introduction of an official CBDC but also an actual demonstration of cross-industry collaboration.

The HKMA’s proactive approach doesn’t end with the launch of its CBDC pilot program. The central bank plans to establish a CBDC Expert Group. This group would focus on recruiting university academics. Through recruiting young experts, the central bank plans to have a better idea of important issues such as privacy protection, cybersecurity, and interoperability.

HKMA’s Chief Executive, Eddie Yue, expressed enthusiasm about the pilot. He emphasized its value as a platform for collaborative exploration with the industry.

“While the HKMA has not yet made a decision on whether and when to introduce e-HKD, we are excited to kick-start the e-HKD Pilot Programme.”

Eddie Yue, Chief Executive of HKMA

Yue also expressed HKMA’s intention to share key learnings at Hong Kong FinTech Week 2023. Additionally, he plans to conduct more rounds of pilots with the industry in the future.

The overarching aim, as articulated by Yue, is to ensure the relevance of CBDC research and development efforts. This would then contribute to enabling the translation of outcomes into viable business opportunities.