The Hong Kong Monetary Authority (HKMA), Hong Kong’s central bank, today announced the launch of the second phase of the e-HKD pilot program.
In addition, they are inviting industry participants to submit ideas for future use cases of the central bank’s digital currency(CBDC). The goal of this endeavor is to expand knowledge of the potential of central bank digital currency (CBDC) for the region.
HKMA invites industry to participate in the second phase of e-CBDC piloting
The goal of the second phase of the e-HKD pilot, which was announced by the HKMA on March 14, is to further explore the possibilities of the digital Hong Kong dollar, focusing on programmability, tokenization and atomic settlement.
The HKMA plans to explore new e-HKD use cases and reconsider the applications of the first phase, which ended in October 2023. Initially, e-HKD was successfully tested for several purposes in the domestic retail market, such as offline transactions, programmable payments and tokenized asset settlement.
The HKMA stressed that Project Ensemble, a recently launched initiative focusing on wholesale CBDCs, will benefit from the improved sandbox. By enabling e-HKD to integrate seamlessly into the current financial system, the regulatory sandbox is an essential mechanism in the HKMA’s work to improve the network around CBDCs.
The collaboration aims to “accelerate the development and testing of use cases” for participants as they explore interoperability between e-HKD and other forms of digital currency. The e-HKD sandbox infrastructure will be crucial to the eventual introduction and integration of digital currency into Hong Kong’s financial market.
The HKMA pilot site reports that the second phase of the e-HKD pilot is expected to last until mid-2025 . Organizations that want to participate in the program must submit applications by May 17. In the first phase, the HKMA said financial institutions and payment service providers accounted for a significant portion of participants.
At this point, participants will have the opportunity to test and evaluate suggested use cases. Innovation, impact on consumer experience, readiness for market testing, regulatory compliance and maximizing the use of e-HKD in Hong Kong are the HKMA’s standards for participation.
The program attracts leaders in the financial and payments sectors
Key players from various sectors, such as major financial institutions and payment companies that participated in the first phase, will also be key in the second phase of the program. Some of the names on the list in the first phase included major financial institutions and payment companies such as Alipay, Bank of China, HSBC, Hang Seng Bank, China Construction Bank, Industrial and Commercial Bank of China, Mastercard, Visa, Boston Consulting Group and ZA Bank.
The HKMA launched an e-HKD pilot program in November 2022 to assess the commercial viability of an internal CBDC as part of its “Fintech 2025” strategy . Phase one was dedicated to testing e-HKD in six areas: full-fledged payments, programmable payments, offline payments, tokenized deposits, and settlement of Web3 transactions and tokenized assets.
Research on the Central Bank of Hong Kong’s (CBDC) digital currency ranks the region among more than a hundred jurisdictions around the world that are exploring the possibilities and benefits of CBDC. The widespread interest in CBDC indicates a growing understanding of the potential of digital currencies to improve the security, efficiency and integration of financial systems.
Progress on the e-HKD pilot will improve Hong Kong’s financial framework and understanding of CBDCs around the world. The results of this pilot could influence the adoption and regulation of digital currencies around the world, setting a precedent for future efforts in digital finance.
