May 19, 2023

HKMA Commences e-HKD Pilot Programme

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The Hong Kong Monetary Authority (HKMA) commenced its e-HKD Pilot Programme for a retail central bank digital currency (CBDC) on 18 May.

As part of its “Fintech 2025” strategy to future-proof Hong Kong in terms of CBDC/e-HKD readiness, the initiative launched with the announcement that 16 firms from the financial, payment and technology sectors have been selected to participate in the first round of pilots for 2023.

The HKMA also announced plans to establish a CBDC Expert Group exploring key CBDC policy and technical issues including privacy protection, cybersecurity and interoperability.

Background

The HKMA announced in September 2022 that a three-rail approach would be adopted to prepare for possible e-HKD implementation.

One of the rails, Rail 2, involves the HKMA taking deep dives into exploring implementation and design issues relating to e-HKD. This includes deepening research into application issues – and gaining actual experience through conducting a series of pilots with various stakeholders. 

Pilot Programme

The Pilot Programme is a key component of Rail 2, conducting pilots in close collaboration with various stakeholders, examining use cases in six categories including full-fledged payments, programmable payments, offline payments, tokenised deposits, settlement of Web3 transactions and settlement of tokenised assets, as well as implementation and design issues relating to e-HKD. 

For now, a total of 16 firms from the financial, payment and technology sectors have been selected to participate in the first round of pilots for 2023. They include the three note-issuing banks – HSBC, Standard Chartered Bank (HK) and Bank of China (HK) – and other banks including Hang Seng Bank, CCB Asia, ICBC Asia, Fubon Bank HK and ZA Bank, along with payment, fintech and technology companies including Mastercard Asia, Alipay Financial Services HK and HKT Payment. 

The HKMA has not yet decided on whether and when to introduce e-HKD, expecting to conduct more rounds of pilots with the industry before making a firm decision.

The HKMA targets sharing the latest key findings publicly during the Hong Kong FinTech Week 2023 at the Hong Kong Convention and Exhibition Centre on October 30-November 5.

CBDC Expert Group

To facilitate collaboration between the Government, industry and academia on CBDC research, the HKMA now plans to establish a CBDC Expert Group. This will comprise leading academics from local universities contributing valuable insights on key CBDC policy and technical issues including privacy protection, cybersecurity and interoperability.

By fostering Government-industry-academia collaboration, the HKMA aims to ensure relevance of the research and development efforts, and enable translation of such outcomes into viable business opportunities.

Links to HKMA Press Releases

Hong Kong Monetary Authority - Commencement of the e-HKD Pilot Programme (hkma.gov.hk) (18 May 2023)

Hong Kong Monetary Authority - HKMA’s policy stance on e-HKD (20 September 2022)

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