Ali Raza
Hong Kong is getting ready to launch its central bank digital currency. The e-HKD will be launched during the fourth quarter on a trial basis. The trial will determine whether the e-HKD will be released to the public.
Hong Kong readies for CBDC launch.
The launch of the trial phase for the Hong Kong CBDC was announced through a press release. The Hong Kong Monetary Authority (HKMA) said that the trial phase was realized after gathering 75 responses from a consultation issued in April about its plans for issuing the CBDC.
In the official release, the regulatory body said it would start clearing the way for the possible launch of the CBDC in the future. It added that the responses received during consultations supported e-HKD’s launch and believed that the launch of the CBDC would streamline the payment systems and support the digital economy.
The respondents also took note of the need to conduct further investigations on a wide range of issues. These issues include privacy, legal matter, and use cases. The HKMA also said it would adopt a three-rail approach for the CBDC.
Rail 1 will seek to unveil the technology and the legal foundation that will support its implementation. The regulatory body will determine and examine the areas needed to prepare for legislative changes. The legislative changes enable issuing of a digital version of fiat currency that will also be classified as legal tender in Hong Kong.
Under rail 2, the HKMA will assess the use cases of the CBDC, including its application, implementation, and design. Furthermore, it will have several pilot phases in partnership with stakeholders to realize the actual experience of using the CBDC.
Under Rail 3, the e-HKD will be launched. The third phase will include the outcomes of Rail 1 and Rail 2 to support planning. It will also set a timeline supporting the launch of the e-HKD. However, Rail 3 will only be realized depending upon the performance of Rail 1 and Rail 2.
The Chief Executive Officer of the HKMA, Eddie Yue, commented on the launch of this CBDC saying that the consultation phase has seen many people support the e-HKD launch. According to the executive, the HKMA had agreed with the respondents that it would be keen on issues like privacy protection and use cases.
“As Hong Kong’s central banking institution, we will ensure that Hong Kong continues to play a leading role in the global financial landscape by getting ourselves ready as best we can in terms of CBDC and by providing the right soil for growing innovative ideas,” Yue added.
Mainland China is steps ahead in CBDC launch
Mainland China banned cryptocurrency activities in 2021, which led to crypto trading activities and Bitcoin mining sites migrating to offshore locations. However, mainland China has been steps ahead in its CBDC launch despite this ban.
China’s digital yuan is currently in an advanced trial phase. The digital yuan is already in use across several cities in China. China has been lauded for its efforts to launch the CBDC, with some economists believing that it could replace the US dollar as a global reserve currency.
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This article was written for Business 2 Community by Ali Raza.
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