Sixteen banks and payment firms are involved in a trial using the “e-HKD,” including the three note-issuing banks—HSBC, Standard Chartered and the Bank of China (Hong Kong).
Hong Kong’s central bank unveiled the island’s digital currency pilot program in mid-May. Sixteen banks and payment firms are involved in a trial using the “e-HKD,” including the three note-issuing banks—HSBC, Standard Chartered and the Bank of China (Hong Kong). Hang Seng Bank and China Construction Bank (Asia) are included among the participants.
According to the Hong Kong Monetary Authority (HKMA), the initiative paves the way for a virtual coin the public can use for funds transfers, shopping and dining. Participating institutions will select small groups of clients to test six potential e-HKD uses: online payments, tokenized deposits, collecting government payouts, retail and eatery payments, tokenized asset settlement and Web3 trading and clearing.
Most of the city’s biggest banks are participants in the pilot project. Also involved are several payment technology firms, including Visa, Mastercard Asia, Boston Consulting, Ripple Labs, Alipay Financial Services (HK) and Gieseck+Devrient.
The HKMA also announced plans for a central bank digital currency expert group of scholars to explore interoperability, cybersecurity and privacy issues. In addition, the bank regulator reportedly will issue a finite amount of digital funds in a controlled experimental environment where participating companies can discover any infrastructure, security or operational issues.
A key innovative use case will explore the possibility of tokenized commercial bank deposits with HSBC, Hang Seng Bank and Visa, with Visa providing the interoperability infrastructure between the banks. HSBC will also collaborate with Visa in simulating tokenized deposits while the bank tests e-HKD payments on the campus of the Hong Kong University of Science and Technology.
The HKMA will announce the pilot scheme’s results in a report this November, HKMA Deputy CEO Howard Lee said in mid-May. A rollout date for the e-HKD has yet to be announced.
In a study released by US fintech firm FIS in March of this year, digital wallet use will likely eclipse credit cards as Hong Kong’s most popular e-payment method by 2025. Digital wallets like Octopus, WeChat Pay, Alipay and Tap & Go had more than 4.7 million new users and added 96,000 new merchants in Hong Kong by the end of 2021.