Hong Kong is exploring CBDC as part of its fintech strategy

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The Hong Kong Monetary Authority (HKMA) today released an official white paper exploring the potential of a retail-focused central bank digital currency (CBDC), the Hong Kong digital dollar (e-HKD).

According to the document, the HKMA will attempt to understand the “potential architectures and design options” from a technical and regulatory perspective, with the aim of creating a dualistic system – the first for a “central bank to issue and” cash in CBDC “and the the second is retail-oriented for “commercial banks to distribute and circulate either rCBDC or CBDC-based e-money”.

Hong Kong started its investigation into CBDCs in 2017 with the LionRock project and began a seven-month collaboration with the Bank of Thailand in early 2020 to investigate the “potential of CBDC in wholesale for cross-border payments”.

The initiative developed into a multiple CBDC bridge in February 2021 after the introduction of the Central Bank of the United Arab Emirates and the Digital Currency Institute of the People’s Bank of China. This “m-CDBC” will aim to provide a proof-of-concept model for a unified payment network using distributed ledger technology.

In June of this year, HKMA announced Fintech 2025, a financial technology initiative that will focus on five areas of innovation, including helping central banks adopt a CBDC, developing a skilled workforce, and the initiative launched today. HKMA chief of HKMA Eddie Yue said:

“The white paper marks the first step in our technical exploration of the e-HKD. The knowledge gained from this research, together with the experience we have gained from other CBDC projects, would contribute to further deliberations and reflections on the technical design of the e-HKD.

Related: CBDCs Can Cut Cross-Border Remittance Costs In Half: BIS Report

“We also look forward to feedback and suggestions from academia and industry to enrich our perspective,” added Yue.

Although the People’s Republic of China has issued a blanket ban on all crypto-related activities alongside Hong Kong, it is consistently pursuing a CBDC and establishing itself as a prominent market leader in the emerging world market.