The Hong Kong Monetary Authority (HKMA) has initiated the second phase of its e-Hong Kong dollar (e-HKD) pilot program and is encouraging industry participants to submit potential use cases for its central bank digital currency (CBDC).
On March 14, the HKMA announced the commencement of the second phase of the e-HKD pilot, aimed at exploring the possibilities of a digital Hong Kong dollar. This phase will delve deeper into the key areas identified in the previous phase, such as programmability, tokenization, and atomic settlement. Additionally, the HKMA intends to explore new use cases that were not covered before.
The central bank has urged market participants to apply for the pilot, with the deadline for applications set for May 17. The HKMA anticipates that the second phase of the e-HKD pilot will continue until mid-2025, allowing participants sufficient time to test and evaluate their proposed use cases.
Guidelines have been provided by the financial regulator for those interested in participating in the pilot. Applications will be evaluated based on their level of innovation, distinctiveness from existing market offerings, impact on consumer experience, readiness for market testing, compliance with current regulations, and the extent to which they maximize the use of e-HKD in Hong Kong.
The CBDC project was introduced in 2021 as part of Hong Kong’s “Fintech 2025” strategy. On June 8, 2021, the central bank published its CBDC plans, emphasizing its contribution to the government’s broader initiatives to promote the adoption of digital finance in the special administrative region by 2025.
According to the central bank, it has been conducting research on CBDCs since 2017 to gain insights into their potential applications. The HKMA is currently intensifying its efforts to enhance Hong Kong’s preparedness to issue CBDCs at both the wholesale and retail levels.
Prominent institutions, including payment processor Visa, participated in the e-HKD pilot. On November 1, Visa successfully concluded its pilot test of the digital Hong Kong dollar in collaboration with local banks HSBC and Hang Seng Bank. The pilot involved the tokenization of deposits, where money was created on a blockchain ledger with the support of a balance sheet.