Hong Kong Monetary Authority Completes CBDC Pilot

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  • The Hong Kong Monetary Authority (HKMA) has completed phase 1 of a retail Central Bank Digital Currency pilot
  • The pilot showed potential benefits like programmability, transaction speed, and cost-efficiency
  • The HKMA emphasized that more investigation and larger-scale testing are needed before deciding to introduce a digital Hong Kong dollar

The Hong Kong Monetary Authority (HKMA) has completed phase 1 of a pilot program exploring the potential of a retail Central Bank Digital Currency (CBDC). While the HKMA hasn’t yet decided to introduce a digital Hong Kong dollar, provisionally called the e-HKD, the pilot revealed several potential advantages of such a system, including programmability, speed, and cost. However, it also noted that further investigation was needed, as was larger-scale testing.

Fast, Programmable Money

The HKMA’s report, published yesterday, highlighted key areas where a CBDC could add value to the country’s economy, including programmability of the CBDC token, tokenization, and atomic settlement, all of which could potentially lead to faster, more cost-efficient, and inclusive transactions.

However, the report also noted that the pilot was conducted on a small scale in a controlled environment, with large-scale real-life applications of an e-HKD requiring further investigation. Concerns were also raised that there were elements of the CBDC that were not as user-friendly as regular payments, a crucial element of any potential CBDC uptake.

Project e-HKD Needs More Testing

The HKMA initiated the ‘Project e-HKD’ feasibility study in 2021, and the results of the first have seemingly been encouraging. Hong Kong will now explore new use cases for an e-HKD, focusing on its role in facilitating innovative ways of conducting transactions while ensuring financial stability.

The report underscores that more investigation and market development are essential before the potential value of an e-HKD can be substantiated for large-scale issuance, signaling a cautious yet promising approach to digital currency adoption.

Whether citizens of the Chinese-controlled state will be pleased with a form of money essentially programmed by the Chinese government is yet to be ascertained, although it can be imagined.