Hong Kong is currently pursuing an expansion of the digital yuan’s application. It is also approaching the second phase of its own CBDC pilot program and completing consultations for stablecoin issuance.
A few years ago, China made headlines due to the launch of its digital yuan. It is by far one of the most prominent central bank digital currencies (CBDCs) and has been successful. In fact, it was just announced that Hong Kong will be helping to expand the testing of the digital yuan. This comes just as the first phase of the digital Hong Kong Dollar is wrapping up.
Digital Yuan Update
In a recent speech, Financial Secretary Paul Chan announced that digital yuan users would be able to top up their wallets using an existing system. This will be through the Faster Payment System (FPS), which is expected to facilitate more cross-border use of the digital yuan.
This works through the use of email addresses and phone numbers to send funds from one wallet to the other.
Additionally, this is also seen as an effort to bridge mainland China with the rest of the world, which had always been a major focus of the CBDC. Besides this development with the digital yuan, the Hong Kong Monetary Authority (HKMA) has also given an update regarding its own CBDC.
Dubbed the e-HKD, this digital version of the Hong Kong dollar completed its first pilot testing phase in October 2023. Following this trial, the authority has said that it is examining the retail use of the token in cases such as, “programmable payments, offline payments and tokenized deposits”.
Soon, it plans to roll out the second phase of the pilot study which will focus not only on these retail uses but other complex ones.
Hong Kong’s Ambitious Digital Asset Plans
Besides the work with China and its own CBDC, Hong Kong has undertaken several projects that signal ambitious plans for digital assets. There is its mBridge CBDC project, which is a collaboration between the Bank for International Settlements, the HKMA and the central banks of China, Thailand, and the UAE. The goal of the project is to facilitate cross-border payments through a common multi-CBDC platform.
There is also the world’s first multi-currency tokenized bond, which was issued by Hong Kong in February 2023. A second batch of tokenized green bonds was issued in February 2024, and Chan has noted the overwhelming interest from corporate institutions in both batches.
Finally, the HKMA, along with the Treasury Bureau, is rounding up its public consultations regarding the regulation of the issuance of stablecoins. All these efforts show that Hong Kong is pursuing more developments in the digital assets market and is looking to become a hub for them in the future.
And as other countries like the USA and Canada pursue their own CBDC ambitions, it will be interesting to see who comes out on top.