Explainer | How can Hongkongers benefit from e-HKD? Consumers can draw comfort from its security, higher returns and even offline payments

Sixteen banks and payment companies have rolled out dozens of experiments among small groups of consumers using e-HKD, under the Hong Kong Monetary Authority’s (HKMA) broader plan to introduce a central bank digital currency (CBDC) for making payments at shops and restaurants.

The trial aims at assessing six potential uses of the e-HKD – online payments, payments at shops and restaurants, collecting government payouts, tokenised deposits, tokenised asset settlement, and Web3 trading and clearing.

Hong Kong’s three note-issuing banks, HSBC, Standard Chartered Bank and Bank of China (Hong Kong), as well as a number of payment and technology companies, are taking part in the trial.

Here is what you need to know about this project:

Why are over 100 central banks globally studying the launch of digital currencies?

Central banks’ mandate is primarily to provide price stability and the stability of purchasing power, and to fulfil these mandates, they have the responsibility to conduct prudent monetary policies. CBDCs can support the ability of central banks to fulfil their mandates for monetary and financial stability.

“Central bank digital currencies like the e-HKD are a great tool” to achieve such mandates, according to Julia Demidova, head of CBDC product and strategy, at FIS.

While we already use e-wallets, credit cards and other electronic means to make payments, why do customers need the e-HKD?

A key advantage of e-HKD is that it can provide additional protection to customers, especially those making prepayments, tests by BOCHK have shown. Such features are, also called programmable payments, have rules encrypted in the digital currency that restrict the usage of the money.