The Hong Kong Monetary Authority (HKMA) announced the launch of the second phase of the e-Hong Kong dollar (e-HKD) pilot program, calling on industry participants to submit potential use cases for the central bank digital currency (CBDC). HKMA revealed the start of the second phase of the e-HKD pilot on March 14 to explore the digital Hong Kong dollar’s potential.
Significant Developments for e-HKD
This step involves a deeper development of the key areas where e-HKD can provide value, identified in the first phase. These areas include programmability, tokenization, and the settlement process. HKMA also stated that it would explore new use cases not previously addressed in the earlier phase.
The central bank has called on market participants to apply and has given them until May 17 to submit their applications. HKMA estimates that the second phase of the e-HKD pilot will last until mid-2025, providing participants with ample time to test and evaluate their proposed use cases.
The financial regulatory body provided guiding principles for those wishing to participate in the pilot. According to HKMA, applications will be evaluated based on their innovative aspects or uniqueness from current market offerings, impact on consumer experience, readiness for market testing, compliance with existing regulations, and how they maximize the use of e-HKD in Hong Kong.
Noteworthy Details of the Process
The CBDC project was initiated in 2021 as part of Hong Kong’s Fintech 2025 strategy. The central bank published its CBDC plans on June 8, 2021. It emphasized that this is part of the government’s broader efforts to promote the adoption of digital finance in the special administrative region by 2025.
The central banking institution claims to have been researching CBDC projects since 2017 to understand their potential applications. HKMA now says it has intensified efforts to prepare Hong Kong for CBDC projects at both institutional and individual levels.
Leading institutions like the payment processor Visa have participated in the e-HKD pilot program. Visa completed a digital Hong Kong dollar pilot test on November 1 with local banks HSBC and Hang Seng Bank. The pilot test involved the tokenization process of deposits printed on a blockchain ecosystem with balance sheet backing.
