Hong Kong launches e-HKD pilot

19 May 2023

The Hong Kong Monetary Authority (HKMA) has revealed the start of its e-HKD pilot programme.

The institution stated on Thursday that a total of 16 companies from the financial, payment and tech sectors have been chosen to take part in the first round of e-HKD pilots for this year.  

The HKMA commented: “The pilots will take deep dives into potential use cases in six categories, including full-fledged payments, programmable payments, offline payments, tokenized deposits, settlement of Web3 transactions, and settlement of tokenized assets.”

The authority went on to add: “The HKMA will conduct a series of pilots in close collaboration with various stakeholders to examine the use cases, as well as implementation and design issues relating to e-HKD,” stating it plans to share the key learnings from the programme during Hong Kong Fintech Week 2023 in November. 

The businesses taking part in the pilot include Alipay Financial Services, Bank of China, China Construction Bank, Fubon Bank, Ripple Labs, Standard Chartered Bank, Hang Seng Bank, HSBC, Visa, Industrial and Commercial Bank of China, Mastercard Asia/Pacific, and Boston Consulting Group, Bitcoin.com reports.

HKMA’s chief executive, Eddie Yue stated: “While the HKMA has not yet made a decision on whether and when to introduce e-HKD, we are excited to kick-start the e-HKD Pilot Programme, which serves as a tremendous opportunity for the HKMA to collaborate with the industry in exploring innovative use cases and maximizing our readiness for a potential e-HKD.”

Last September, the HKMA published its policy stance on e-HKD within its “Fintech 2025” strategy. Two phases of market consultation were carried out: one focused on high-level technical design and the other on key policy and design factors.

The authority said at the time it will implement a three-rail approach. Rail 1 sets out the technological and legal foundations for the e-HKD; Rail 2 looks into use cases and undertakes pilots; and Rail 3 is focused on the launch of the e-HKD based on the previous phase outcomes, the Bitcoin.com report adds. 

“The e-HKD Pilot Programme is a key component of Rail 2 under the HKMA’s three-rail approach in paving the way for the possible implementation of a retail central bank digital currency (CBDC), i.e., e-HKD, in the future,” the HKMA continued. 

However, although central bank digital currencies have the benefits of efficiency, transparency and convenience, one thing they don’t have is privacy. CBDCs provide governments with increased oversight into transactions in real-time, possibly resulting in the collection of sensitive personal information. This may include spending habits, income and other financial activities.