Currency

Hong Kong’s digital currency: HKMA launches phase 2 of e-HKD pilot programme, delving deeper into potential uses


“Building on the success and experience of phase 1, the next phase will delve deeper [to explore] where an e-HKD could add unique value, namely programmability, tokenisation and atomic settlement,” the HKMA said in a press release on Thursday. Atomic settlement refers to instant payments.
In October, the city’s de facto central bank completed the first trial run of the e-HKD featuring 16 banks and payment companies and their six “use cases” with a small group of clients. The six use scenarios tested were online payments, payments in shops and restaurants, the collection of government payouts, tokenised deposits, tokenised asset settlement and Web3 trading and clearing.

It represented the first step towards introducing a virtual coin that the public may eventually use to shop, dine out, and transfer money.

HSBC, Hong Kong’s biggest bank, took part and intends to participate in the second phase.

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“HSBC has been a key participant in the e-HKD pilot and is keen to drive initiatives on all fronts of digital money. We look forward to participating in Phase 2 of the e-HKD pilot programme,” a spokesman said.

In Thursday’s announcement, the HKMA said an “enhanced e-HKD sandbox” will be built under its other project announced last week – Project Ensemble, that focuses on the ecosystem for a wholesale central bank virtual currency roll-out.

The new e-HKD sandbox will support the participants in the second pilot in prototyping, developing, and testing their use cases. It will also facilitate the study of interoperability and interbank settlement between e-HKD and other forms of tokenised money.

Applications to participate in the second trial phase of e-HKD are due by May 17, and the HKMA expects to interview selected applicants in the early summer.

Phase 2 is expected to last until mid-2025 to give participants sufficient time to test and evaluate their proposed use cases, according to the HKMA.

Several criteria have been set to determine which potential use cases will be included in the pilot. It should showcase innovative elements from existing market offerings, enhancements to customer experience or solutions to their pain points. It should also be readily testable, compliant with existing licensing requirements, and maximise the potential use of an e-HKD.

Hong Kong has been at the forefront of experimenting with different forms of digital money and facilitating the blockchain ecosystem. In the past week, the HKMA has launched a “wCBDC” pilot to improve interbank settlements using tokenised money, and a stablecoin sandbox to allow companies to trial cryptocurrency tokens pegged to fiat currency in the city.

It is also formulating a legislative proposal to sell stablecoin to retail investors, and working on a multi-CBDC project called the “mBridge” with the central banks of mainland China, Thailand, and the United Arab Emirates to study the use of such currencies in settling cross-border payments.



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