Exclusive | Hong Kong Monetary Authority will launch trials to find suitable use for proposed digital dollar, CEO Eddie Yue says
- ‘If we want the public to adopt the e-HKD, we need to have a suitable use case that can show that the CBDC is superior or more convenient, or cheaper,’ HKMA CEO says
- The e-HKD will not have conflicts with the three note-issuing banks as the HKMA wants the banks to be distributors of the digital currency
“Hong Kong’s electronic retail payment system is already very diverse, very convenient and very cheap. If we want the public to adopt the e-HKD, we need to have a suitable use case that can show that the CBDC is superior or more convenient, or cheaper,” Yue said in an interview with the Post.
Hong Kong already has a number of digital payment options such as Octopus, WeChat Pay and Alipay among others.
Yue said the e-HKD is a digital form of banknotes, which can be used in different digital scenarios, such as transactions of tokenised assets.
“When we see more innovation in blockchain, there could be new applications of central bank digital currency that we may not be aware of now, but that might come up in future.”
To support the e-HKD as legal tender, the HKMA in the fourth quarter will prepare to propose a law change, and establish the necessary technology infrastructure to support it. Once these are finalised, the bank will determine the exact launch date.
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The e-HKD will not have conflicts with the current three note-issuing banks – HSBC, Standard Chartered and Bank of China (Hong Kong) – as they may be the distributors, Yue said.
“We are leaning towards a two-layer system, meaning that the HKMA will be the issuing authority for the Central Bank Digital Currency, but it will be distributed by different banks,” he said.
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China chose Hong Kong as the first offshore centre to test the e-CNY last December, with the HKMA currently conducting the second round of tests.
“So conceivably, one day in the future e-CNY and e-HKD will coexist the same way that some people in the city carry different types of currencies in their wallet.”
The HKMA introduced FPS in 2018 for online transfers between different banks with the use of a simple identifier, such as a phone number. The FPS registered its 10 millionth user in March.
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“The introduction of e-HKD and e-CNY will be good for the development of fintech in Hong Kong,” said Kenny Wen, head of investment strategy at Hong Kong-based broker KGI Asia. “It could also intensify competition in the retail payment landscape.”
Other experts said cross-border payments could be one of the uses for the proposed e-HKD.
“The CBDC will be reliable and cheaper than other current cross-border payment methods,” said Paul Sin, Greater Bay Area committee member of CPA Australia.
Benjamin Quinlan, CEO and managing partner of Quinlan & Associates, said that e-HKD can make it easier for cross-border payments, which can in turn boost tourism.
“The HKMA has been exploring cross-border FPS payment in Thailand, which is on the right track on this front,” Quinlan said.
