Hong Kong explores CBD as part of fintech strategy

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The Hong Kong Monetary Authority (HKMA) on Monday released an official report that explores the potential of the retail-focused central bank digital currency (CBDC), the Hong Kong Digital Dollar (e-HKD).

According to the document, the CMA will seek to understand “potential architectures and design options” from a technical and regulatory policy perspective, with the ambition to create a dual-tier system — the first designed for a “central bank to issue and redeem central bank currencies,” and the second retail-centric for “banks.” commercial distribution and circulation of electronic money backed by the Central Bank of Central Banks, or rCBDC.”

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Hong Kong began its investigation of central bank digital currencies in 2017 with the LionRock project, and in early 2020, it embarked on a seven-month collaboration with the Bank of Thailand, researching “the possibility of wholesale central bank digital currencies for cross-border payments.”

The initiative quickly evolved into a multi-digital central bank digital currency bridge in February 2021 following the introduction of the UAE Central Bank and the People’s Bank of China’s Digital Currency Institute. This ‘m-CDBC’ will aim to use distributed ledger technology to provide a proof-of-concept model for a unified payments network.

In June of this year, the Capital Markets Authority announced Fintech 2025, a financial technology initiative focusing on five areas of innovation, including providing support to central banks in adopting a digital currency for central banks, and developing a skilled workforce, in addition to the initiative presented today. . HKMA CEO Eddie Yu said:

“The white paper represents the first step in our technical exploration of e-HKD. The knowledge gained from this research, combined with the experience we have gained from other CBDC projects, will help provide further study and deliberation on the technical design of e-HKD.”

Related: Central Bank Digital Currencies Can Cut Cross-Border Remittance Costs in Half: Bank for International Settlements Report

“We also look forward to receiving comments and suggestions from academia and industry to enrich our views,” Yu added.

Despite issuing a blanket ban on all crypto-related activities besides Hong Kong, the People’s Republic of China has been consistently ambitious in its pursuit of CBD, establishing itself as a prominent leader in the burgeoning global market.