The government has no legal power to force retailers spooked by a spate of counterfeits to accept HK$1,000 notes, the Hong Kong Monetary Authority says.
The HKMA made the comment in a paper submitted to the Legislative Council after high-quality fake notes based on the 2003-series HK$1,000 notes issued by the Bank of China and HSBC surfaced last month.
Many shops and restaurants have since put up notices saying that no HK$1,000 notes would be accepted, often regardless of the series.
Chinese-language media have reported that chain stores like 7-Eleven and even government departments have rejected HK$1,000 notes.
New World First Ferry Services apologised to the public for turning down payments made with HK$1,000 banknotes at all its piers during the Christmas and New Year holiday.
In its paper, the authority says that while the HK$1,000 notes are regarded as a sufficient and valid mode of payment under the Legal Tender Notes Issue Ordinance, merchants can still determine the terms of all commercial transactions, including the mode of payment.
It reiterates that the authority and banks will speed up the process of replacing the 2003 series of HK$1,000 notes, which began when the 2010 series of banknotes was introduced.
But it adds that actual progress will depend on how quickly banknotes return to the banking system.
As of yesterday, the police had seized 201 counterfeit HK$1,000 notes in Hong Kong - 149 being passed off as Bank of China bills and 50 purportedly from HSBC - since December 23. More than 150 have been seized in Macau.