A Comprehensive Explanation of Hong Kong’s e-HKD

A Comprehensive Explanation of Hong Kong’s e-HKD

The recent advancement in blockchain technology has boosted the prominence of the central bank digital currency (CBDC) concept. This has spurred research and debates internationally.

Defining e-HKD

Since early 2017, the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, has been evaluating the concept of a digital Hong Kong dollar. In 2021, Hong Kong formally joined the CBDC race by revealing the research for the e-HKD, the Hong Kong dollar’s digital form.

The Hong Kong Monetary Authority is evaluating the commercial feasibility and technicality of unveiling the central bank digital currency on wholesale and retail levels. On the other hand, the e-HKD projects appear to stress issuing a retail digital currency for organizations and the general public. 

HKMA has not determined when or if it will unveil e-HKD to the public. However, it noted that it remains ‘open-minded’ and will keep following global central bank digital currency developments. 

The Hong Kong Monetary Authority has embraced a three-rail strategy to establish the e-HKD. The first rail focuses on the development of the foundational layer, while the second focuses on pilot initiatives. They are anticipated to unite into the third rail, which will involve the e-HKD’s actual unveiling.

Understanding Current Hong Kong’s Progress

In a statement explaining the pilot programs for the digital currency initiative, the Hong Kong Monetary Authority said that an e-HKD would be required to introduce unique value to the present payment ecosystem based on the abundance of convenient retail payment alternatives in Hong Kong.

In November 2022, the Hong Kong Monetary Authority unveiled the e-HKD’s pilot program as a collective effort with members of the local industry. The initial stage entailed participants like the Bank of China, Alipay, Standard Chartered, Alipay, HSBC, and Visa. Partakers were permitted to develop their theoretical versions of the e-HKD.

The initial phase was concluded in October last year and probed six case study topics. They included programmable payments, tokenized assets’ settlements, tokenized deposits, wholly fledged payments, settlement instructions, and offline payments. 

The second phase of the program began in March of this year, following the successful completion of the initial phase. It is anticipated to last until mid-next year and seeks to further investigate the first phase’s outcomes. 

The phase will focus on tokenization, atomic settlement, and programmability. Further, the Hong Kong Monetary Authority said this stage would explore a sandbox program for pilot participants to create wholesale central bank digital currencies.

Anticipated Impact

In a report, Boston Consulting Group (BCG), an international consulting company, noted that adopting new payment systems, including stablecoins and retail e-HKD, can add HK$160B ($20.4B) worth of gross domestic product (GDP) or an extra 0.5% GDP growth annually, for Hong Kong by 2032. 

According to BCG, local users would benefit from the e-HKD through more flexible financing access, more competitive financing tariffs, and quicker loan disbursements through smart contracts. 

Reflection on Crypto Developments in Hong Kong

To realize the benefits, the Hong Kong government must ensure privacy protection and a high-security level, directed by a vivid regulatory structure surrounding the e-HKD.

Recently, Hong Kong has attempted to regain its position as Asia’s crypto hub. In June last year, the region formally began its crypto licensing rule for virtual asset trading platforms, permitting approved exchanges to provide retail trading services.

In December last year, the Hong Kong Monetary Authority, the Financial Services and the Treasury Bureau unveiled a consultation. They suggested a requirement for all fiat-pegged stablecoin issuers to acquire a permit from the Hong Kong Monetary Authority. Afterwards, the Hong Kong Monetary Authority unveiled a sandbox program in March this year for stablecoin providers to enable discussions concerning the proposal.

Zone Crypto Invest provides exposure for numerous crypto businesses, and we invite you to join our community! Connect with us through our Telegram chat for any questions. Given the volatile nature of cryptocurrencies, always conduct thorough research before investing. Many articles on our website are sourced from guest writers or are paid content, and they might not reflect the views of Zone Crypto Invest's internal team. The opinions in these pieces may not always coincide with Zone Crypto Invest's stance. We do not vouch for the accuracy, quality, promotions, or any other aspects showcased on our platform. Please refer to our detailed terms of service and disclaimer for further information.

Eric Lozano
About Author

Eric Lozano

Eric Lozano, a notable expert in crypto journalism, possesses a keen eye for blockchain trends and digital currency analysis. His articles delve deep, elucidating complex crypto topics with precision and flair. As the crypto realm expands, Eric remains an influential and trusted voice for enthusiasts and professionals alike

Leave a Reply

Your email address will not be published. Required fields are marked *

Skip to content