Hong Kong is actively expanding the reach of the digital yuan while simultaneously advancing its own central bank digital currency (CBDC) initiatives and finalising discussions on stablecoin regulations.
The introduction of China’s digital yuan marked a significant milestone in the development of CBDCs globally, drawing considerable attention due to its success and prominence. Recently, it was revealed that Hong Kong plays a crucial role in broadening the scope of digital yuan trials, coinciding with the conclusion of the initial phase of the digital Hong Kong Dollar project.
Paul Chan, the Financial Secretary, highlighted in a speech that digital yuan participants would soon have the option to recharge their wallets through the Faster Payment System (FPS). This integration aims to enhance the digital yuan’s cross-border usability by allowing transfers via email addresses and phone numbers.
This initiative is part of a broader effort to connect mainland China with international markets, aligning with the overarching goals of CBDCs. In addition to these advancements with the digital yuan, the Hong Kong Monetary Authority (HKMA) has provided updates on its digital currency, the e-HKD. After completing its inaugural pilot phase in October 2023, the HKMA is exploring the currency’s potential for retail applications, including programmable and offline payments, as well as tokenized deposits. The next stage of the pilot will delve into these applications further, alongside more sophisticated uses.
Hong Kong’s digital asset strategy extends beyond its collaboration with China and the development of its CBDC. The territory is involved in several pioneering projects, such as the mBridge CBDC project, a joint effort with the Bank for International Settlements, and the central banks of China, Thailand, and the UAE, aimed at streamlining cross-border payments via a shared CBDC platform.
Hong Kong also issued the world’s first multi-currency tokenized bond in February 2023, followed by a second issuance of tokenized green bonds in February 2024. These issuances have garnered significant interest from the corporate sector, as noted by Chan.
Moreover, the HKMA and the Treasury Bureau are concluding public consultations on the regulatory framework for stablecoin issuance. These actions underscore Hong Kong’s commitment to becoming a leading centre for digital assets, amidst global competition in the CBDC arena from countries like the USA and Canada. The outcome of these international efforts in the CBDC space remains highly anticipated.
