Hong Kong, the special administrative region of China, plans on conducting a trial of the digital version of its dollar this year, as it gears up for a rollout soon.
The territory wants to catch up with the other countries that have made progress in the development of their central bank digital currencies (CBDCs), including China which is working on the digital yuan.
Trials to begin
The digital version of the Hong Kong dollar has been named e-HKD and Hong Kong plans on testing it in the coming months of this year.
The Hong Kong Monetary Authority (HKMA) announced that they would make amendments to legislation for conducting the trials and also develop the digital infrastructure needed for supporting the project.
The HKMA functions as the central bank of the territory and its deputy chief executive, Howard Lee, said that they had first conducted consultations for obtaining feedback about the CBDC.
This feedback had been regarding the privacy aspects, the potential demand and other issues associated with a central bank digital currency (CBDC) and were now moving into the pilot phase.
He elaborated that an imminent use case of the CBDC may not exist, but the international development, the feedback from the market and the findings of their study had resulted in this decision.
He said that the HKMA would begin paving the way for the implementation of e-HKD and they would eventually launch it in the future.
According to the high-ranking official, a number of jurisdictions are exploring the launch of their respective central bank digital currencies (CBDCs).
The consultations that had been conducted by the banking authority had some participants who were concerned about Hong Kong falling behind the international trend and emphasized the need to catch up.
The trials for the CBDC would involve selected tech companies, payment providers and banks. Lee said that these entities would examine the use of digital currency amongst a small number of clients and also their employees.
The deputy CEO stated that they wanted to provide customers with more choices with the introduction of e-HKD.
He also stated that the move will not have any impact on the three banks in Hong Kong that issue notes.
The HKMA’s executive director for financial infrastructure, Colin Pou said that after the pilot phase is complete, they will set the time for the digital currency’s launch.
The CBDC plan had first been announced by the regulator in June 2021 and a white paper had been issued in October.
The consultations for the digital currency came to an end in May. A number of central banks all over the world are studying the concept of CBDCs and taking steps to launch their own.
Pilot programs have been launched for the digital yuan by the People’s Bank of China (PBoC) in several cities and it recently announced that it will be expanding it on the provincial level.
Small-scale tests were also conducted this year in Hong Kong with the e-CNY.