Hong Kong, Thailand to roll out two-tier tokens in digital currency prototype to speed up cross-border trade settlement

Under a two-tier issuing system, the Hong Kong Monetary Authority will work with banks as the issuer and distributor of its digital currency

Hong Kong and Thai central banks are exploring blockchain-backed digital currencies to facilitate quicker payment in bilateral trade, at US$19.6 billion in 2018

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Hong Kong Chief Executive Carrie Lam (L) and Thai Deputy Prime Minister Somkid Jatusripitak after signing a memorandum of understanding (MOU) during a ceremony at the Government House in Bangkok, Thailand. Photo: EPA-EFE

Published: 5:30pm, 4 Dec 2019Updated: 6:37pm, 5 Dec 2019

The monetary authorities of Hong Kong and Thailand are poised to roll out a two-tier digital token, part of the process for creating a prototype for cross-border fund transfers between the two economies using financial technology, or fintech.

The first tier of the prototype, known as Project LionRock-Inthanon, involves the issuance of a token to Hong Kong banks taking part in the pilot programme, according to a spokesman of the Hong Kong Monetary Authority (HKMA). The second tier involves the banks distributing the tokens to their corporate customers for settling wholesale payments with other banks, or with other companies, the spokesman said in response to queries by South China Morning Post.

The two-tier system, similar to one under development by the People’s Bank of China, is a step forward in Project LionRock-Inthanon, which was established in November based on a fintech collaboration between HKMA and Bank of Thailand in May. The use of the blockchain-backed token is expected to speed up currency settlement between the two economies - with US$19.6 billion in bilateral trade last year - giving companies and banks more competitive exchange rates for the Hong Kong dollar and the Thai baht.

It’s also a different usage case compared with the digital currency under development by China’s central bank, which is focused on replacing coins and banknotes in circulation to support retail transactions, said the HKMA’s senior executive director Edmond Lau. Project LionRock is focused on streamlining cross-border transfer and payment between banks and companies, Lau said.

“The prospect of issuing a central bank digital currency for retail purpose in Hong Kong is limited, as we have so many retail payment services (ranging from) credit card, debit card, and (others),” Lau said during a panel discussion at the Hong Kong fintech Week last month.

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