Hong Kong explores CBDCs as part of its strategy

The Hong Kong Monetary Authority (HKMA) has recently published an official technical document in which it shows the potential that a central bank digital currency (CBDC) has within retail commerce, thus talking about what it will become in the future Hong Kong digital dollar, which will be called e-HKD.

According to the document that has seen the light, it is indicated that the HKMA seeks to analyze the different architectures and design options with respect to the creation of CBDCs; and to do so it will take a technical and regulatory political perspective. The intention is to create a two-tier system, the first of them designed so that the central bank can issue and redeem CBDC; and a second that is focused on retail. The reason for the latter is to enable commercial banks to distribute and circulate electronic money that is backed by rCBDC or CBDC.

It must be taken into account that Hong Kong already began researching CBDCs in 2017, on the occasion of the LionRock Project; and which also did so at the beginning of last year 2020, at that time in a 7-month collaboration with the Bank of Thailand. In this way he took care of explore the potential of wholesale CBDC for cross-border payments.

The initiative quickly became a multiple CBDC project, after the introduction of the Central Bank of the United Arab Emirates and the Digital Currency Institute of the People’s Bank of China. with his m-CBDC seeks to make use of distributed accounting technology to create a proof of concept model so that there is unification within its payment network.

HKMA Fintech Strategy 2025

In June of this year, the HKMA announced its «Fintech 2025» strategy. Through this they seek to focus on financial technology based on five areas of innovation. These include offering support to central banks in adopting a CBDC; the development of a skilled workforce; and the new CBDC creation initiative.

«The whitepaper marks the first step in our technical exploration for the e-HKD. The knowledge gained from this research, along with the experience we gained from other CBDC projects, would help inform further consideration and deliberation on the technical design of the e-HKD, The CEO of the company has commented on this Hong Kong Monetary Authority (HKMA), Eddie Yue.

Likewise, he wanted to emphasize that they hope to receive comments and suggestions from the industry and academia; and this will help them when it comes to continuing to improve and evolve. Although a general ban was issued on all activities related to this type of digital assets along with Hong Kong; the People’s Republic of China has continued to work on the search for a CBDC; and it is the region that is closest to launching its own digital asset.

In any case, we see how in different parts of the world there is a greater commitment to CBDCs. In fact, within a few years, we are likely to have the vast majority of regions around the world with their own central bank digital currencies. In any case, there are some territories that still resist its creation.

At the moment, the country that looks most likely to launch is China, which will launch its digital yuan to go live ahead of the upcoming Winter Olympics.