Hong Kong Successfully Completes First Phase of CBDC Pilot
Hong Kong has successfully concluded the initial phase of its central bank digital currency (CBDC) project, known as the digital Hong Kong dollar (e-HKD). This milestone marks an important step in the implementation of Hong Kong’s Fintech 2025 strategy and sets the stage for the program’s second phase, which is currently being prepared by the Hong Kong Monetary Authority (HKMA).
Phase 1 of the pilot, which began in November 2022, focused on assessing the commercial viability of e-HKD in various areas. These areas included programmable payments, full-fledged payments, offline payments, Web3-based transaction settlements, tokenized deposits, and tokenized assets-based settlements. The initial report highlighted tokenization, programmability, and atomic settlement as the key benefits of e-HKD for businesses and consumers.
In the upcoming second phase of the e-HKD pilot, the HKMA aims to build upon the accomplishments of Phase 1 by exploring additional use cases for the CBDC. The research will focus on the use cases that showed promise during the initial trial. Distributed Ledger technology-based design is being considered for the CBDC due to its interoperability and high scalability, which are essential qualities for the potential implementation of e-HKD.
A flowchart illustrating Hong Kong’s e-HKD project shows a three-rail approach consisting of foundation layer development, iterative enhancements and industry pilots, and full launch. Currently, the CBDC program is in the second rail, receiving support from both public and private organizations to ensure its commercial viability.
Furthermore, the HKMA remains committed to the first rail programs, which involve establishing technical and legal frameworks for e-HKD. This ensures that the necessary groundwork is laid for a successful implementation.
The HKMA’s Involvement in the mBridge Multi-CBDC Platform
The Bank of International Settlement (BIS) launched Project mBridge in 2021 as a collaborative effort with the HKMA, banks from China, Thailand, the UAE, and the BIS Innovative Hub. The purpose of the platform is to facilitate faster, more transparent, and cost-effective cross-border payments using the mBridge Ledger.
In addition to the founding central banks mentioned above, several commercial banks have also joined the project. As of September 25, the CEO of the HKMA, Eddie Yue, announced that mBridge is becoming commercialized and new member financial institutions from Hong Kong, China, the UAE, and Thailand have been welcomed. Yue encouraged more central banks to join the mBridge platform and revealed plans for the upcoming launch of a minimum viable product to support the gradual commercialization of mBridge.
A pilot is currently underway to investigate the technological and practical feasibility of mBridge, as outlined in the BIS October 2023 report.
In conclusion, Hong Kong’s progress in the CBDC pilot and its involvement in the mBridge platform demonstrate its commitment to advancing digital currency solutions and promoting efficient cross-border payments. These initiatives will contribute to the growth and innovation of the financial sector in Hong Kong and beyond.
Featured image from Shutterstock and chart from TradingView.com.
### News source: bitcoinist.com