Hong Kong Completes First Phase of CBDC Pilot Program
Hong Kong has successfully completed the initial pilot phase of its central bank digital currency (CBDC) project, known as the digital Hong Kong dollar (e-HKD). The pilot program, which began in November 2022, aimed to assess the commercial viability of the CBDC as part of Hong Kong’s Fintech 2025 strategy.
Exploring Use Cases for e-HKD
The first phase of the pilot program evaluated six key areas where the e-HKD could be utilized, including programmable payments, offline payments, and tokenized assets-based settlements. The latest report highlighted tokenization, programmability, and atomic settlement as the primary areas where e-HKD will benefit businesses and consumers.
The second phase of the pilot program will build upon the achievements of the first phase and explore additional use cases for the CBDC. The Hong Kong Monetary Authority (HKMA) will focus on researching use cases that showed promise during the initial trial. The HKMA is considering a distributed ledger technology-based design for the CBDC due to its interoperability and scalability.
Three-Rail Approach for e-HKD Project
The e-HKD project in Hong Kong follows a three-rail approach consisting of foundation layer development, iterative enhancements and industry pilots, and full launch. Currently, the CBDC program is at the second rail stage with support from public and private organizations. The HKMA will continue working on rail-1 programs to establish technical and legal frameworks for e-HKD.
The HKMA’s Involvement in mBridge Multi-CBDC Platform
In addition to its local CBDC initiatives, Hong Kong’s HKMA is also involved in Project mBridge launched by the Bank of International Settlement (BIS). This collaborative effort aims to create faster, more transparent, and cost-effective cross-border payment solutions using the mBridge Ledger. Several central banks and commercial banks have joined the project.
The CEO of HKMA, Eddie Yue, announced that mBridge is becoming commercialized, with new member financial institutions from Hong Kong, China, the UAE, and Thailand joining the platform. Yue encouraged more central banks to participate in mBridge and revealed plans to launch a new product to facilitate its gradual commercialization.
Hot Take: Hong Kong Advances in CBDC Development
Hong Kong’s completion of the first phase of its CBDC pilot program marks a significant milestone in the development of its digital currency. The evaluation of various use cases and the exploration of distributed ledger technology demonstrate Hong Kong’s commitment to harnessing the benefits of CBDCs for businesses and consumers. Additionally, Hong Kong’s involvement in Project mBridge highlights its dedication to facilitating efficient cross-border payments. As the second phase of the pilot program commences, Hong Kong is positioned to further advance its CBDC initiatives and contribute to the global adoption of digital currencies.
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