Hong Kong’s financial regulators have announced the start of a second round of experiments for mainland China’s digital currency. The city will link the Chinese digital yuan to its domestic payments system as part of the future tests to assess the CBDC’s usability in cross-border scenarios.
Residents of Hong Kong can now load E-CNY Wallets using their mobile phones. China has made significant progress in developing and implementing a central bank digital currency (CBDC). While officials in Beijing have stated that the e-CNY is now an internal project, cross-border experiments have begun in Hong Kong’s special administrative area.
Following small-scale trials using digital yuan wallets, the new phase of testing will look into how Hong Kong residents may load their e-CNY wallets utilizing the city’s speedier payment network. Currently, the system is processing domestic payments made via mobile devices.
On Tuesday, the fresh trials were unveiled in a press conference. Nelson Chow, the Hong Kong Monetary Authority’s (HKMA) top fintech officer, explained to the media that
“This will allow Hong Kong citizens to use e-CNY when they cross the border.”
The HKMA will look into the feasibility of a CBDC that focuses on the retail market. The HKMA has previously said that CBDCs are being implemented to streamline cross-border interbank payments. The regulatory body announced this week that it would publish a paper in a year investigating the possibility of a retail-focused CBDC.
The document will look at some of the possible applications for an e-HKD that Hong Kong may decide to establish. The research will also look into data protection and anti-money laundering regulations, according to Hong Kong’s central banking organization. Eddie Yue, the CEO of the HKMA, said:
People are becoming increasingly accustomed to digital payments, and if other central banks are considering CBDC use cases, you should give it a shot to see if you can make it work.
The HKMA is continuing its cross-border CBDC trials alongside other consumer-focused programs, according to the report. The central banks of China and the United Arab Emirates joined a wholesale CBDC experiment run by the HKMA and the Bank of Thailand earlier this year.
In the meantime, the People’s Republic has been testing its own digital currency. Authorities in Beijing and Shanghai announced plans to distribute over $9 million in digital yuan in red envelope lotteries earlier this month. The winners will be able to spend their winnings at merchants that accept CBDC.