Hong Kong CBDC Advances to Phase 2 after Successful First Phase

Hong Kong’s central bank digital currency (CBDC) pilot is set to advance to its second phase following the successful completion of phase one. The first phase was largely focused on full-fledged payments, programmable payments, offline payments, tokenized deposits, and the settlement of Web3 transactions and tokenized assets.

The e-HKD (e-Hong Kong dollar) pilot program was launched by the Hong Kong Monetary Authority (HKMA) in November 2022 to investigate the feasibility of a CBDC as part of the city-state’s “Fintech 2025” strategy. With the first phase of the pilot now complete, the HKMA has concluded that an e-HKD could benefit consumer and local enterprises in three main areas: programmability, tokenization, and atomic settlement.

“The next phase of the e-HKD pilot program will build on the success of Phase 1 and consider exploring new use cases for an e-HKD,” the report reads in part.

Going forward, the program will now hone in on use cases identified in Phase 1 as having great potential. The project is leaning towards the use of distributed ledger technology (DLT) in its design due to the technology’s interoperability and scalability capabilities.

The e-HKD program has taken a three-rail approach for the potential implementation of the virtual currency: foundation layer development, industry pilots and iterative enhancements, and full launch. Now at the second rail, the project will take input from stakeholders in both the public and private sectors to help determine the commercial viability for both sides. The HKMA will, in the meantime, continue to work on some aspects of rail one such as the legal and technical basis of the CBDC.

The HKMA jointly launched the multiple CBDC Bridge (mBridge) project with the Bank for International Settlements (BIS) Innovation Hub and central banks in China, Thailand, and the United Arab Emirates in 2021. The purpose of the project is to explore solutions for faster, cheaper, and more transparent cross-border CBDC payments.

HKMA CEO Eddie Yue revealed late last month that mBridge was looking to expand and commercialize by onboarding new banking members from China, Hong Kong, Thailand, and the United Arab Emirates.

“We are expecting to welcome more fellow central banks to join this open platform. And very soon, we will launch what we call a minimum viable product, with the aim of paving the way for the gradual commercialization of mBridge,” added the exec.

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2023-10-31 14:57