Hong Kong’s trials of a digital currency known as e-HKD have demonstrated potential use cases in payment, deposit, and investment scenarios, according to Eddie Yue Wai-man, CEO of the Hong Kong Monetary Authority (HKMA). However, further experience is needed before setting a launch date.
The trials, initiated in May, involved 16 banks and payment companies testing the digital currency with select clients, representing a step toward introducing a virtual coin for public use in shopping, dining, and money transfers.
One interesting use case explored is programmable payments, where rules encoded in the digital currency restrict its use. For instance, it can ring-fence a consumer’s money on deposit with a merchant to protect it in case of the merchant’s financial instability.
Bank of China (Hong Kong) recently conducted a trial of this feature, allowing customers to use e-HKD for prepaid coupons related to various services, such as facial treatments, gym memberships, and medical treatments.
HSBC, the largest bank in Hong Kong, also collaborated with the Hong Kong University of Science and Technology and 200 students for an e-HKD pilot program on campus in September.
E-HKD represents the retail side of Hong Kong’s central bank digital currency (CBDC) initiative. Additionally, HKMA has been collaborating with the People’s Bank of China (PBOC), the central banks of Thailand and the United Arab Emirates, on a multi-CBDC project called “mBridge” to explore its use in settling international payments.
The project has garnered interest from the Saudi Central Bank (SAMA) and 20 other global monetary authorities who are observing its progress. The four central banks involved in the trial will address important policy matters like governance and liquidity provisions and aim to launch a minimum viable product in the middle of the next year.
Yue noted that the ability of e-HKD to make payments could facilitate the tokenization of real estate and other real-world assets.
The 16 banks and payment companies involved in the e-HKD trials will compile a report during Hong Kong Fintech Week, taking place from October 30 to November 5. Yue emphasized the need for Hong Kong players to gain more experience with the digital currency before determining a launch timeline. He highlighted that any use case for e-HKD should offer improved safety, speed, or convenience compared to existing retail payment methods to be viable.
The HKMA is among about 100 central banks worldwide exploring or introducing virtual currencies. Mainland China has conducted pilot schemes for its digital yuan, the e-CNY, and the HKMA has been conducting trials using e-CNY for retail transactions in Hong Kong since last year.
