Hong Kong ramps up research into CBDC

08 Nov 2019

HK flagThe Hong Kong Monetary Authority (HKMA) has revealed it is carrying out research into applications for a central bank digital currency (CBDC).

Announced during Hong Kong Fintech Week the HKMA is planning to release a report based on its findings in the first quarter of next year.

In addition, HKMA announced it had signed a blockchain collaboration with a subsidiary of the Institute of Digital Currency at the People’s Bank of China.

During Fintech Week, HKMA’s senior executive director, Edmond Lau spoke about the bank’s CBDC research, which has allegedly been ongoing since 2017.

The project is being undertaken with Hong Kong Interbank Clearing Ltd., three other banks and blockchain consortium R3.

The project entails a proof-of-concept study on token-based CBDC, research into debt securities issuance utilising blockchain and an appraisal of CBDC’s payment systems potential, as well as a potential two-tier issuance model, permitting corporates to hold and use CBDC tokens as sponsored participants of their banks, reports Coin Telegraph.

That said, HKMA is concentrating on the potential use of a CBDC for financial institutions rather than retail clients, with the onus on domestic interbank payments, wholesale corporate payments and the possibility for delivery-versus-payment in debt securities settlement.

Earlier this year, in May, HKMA signed a memorandum of understanding with the Bank of Thailand to carry out a joint research project into the usage of a central bank digital currency for cross-border payments and interbank payment-versus-payment services between both countries.

As previously reported, the co-founder of Ethereum and ConsenSys CEO Joe Lubin stated he believed the People’s Bank of China will unlikely apply the decentralised aspects of blockchain for the forthcoming CBDC.

He said the asset would, in all likelihood, be used to allow authorities to maintain their existing oversight of capital flows, and that the PBoC will make use of “some of the cryptographic primitives of blockchain.”