HKMA delves deeper into digital currency

Finance | Avery Chen 9 Jun 2021

Hong Kong is exploring the prospect of a central bank digital currency and hopes to have initial ideas within 12 months, says Eddie Yue Wai-man, chief executive of the Hong Kong Monetary Authority.

The banking regulator has been researching digital money with a focus on wholesale cross-border payments. And it will soon begin a study on issuing retail digital currency - e-HKD - Yue said.

The authority has also been working with the Bank for International Settlements Innovation Hub Hong Kong Centre on the technical aspects of issuing retail digital currency and possible architectural designs, he said.

It has also established a cross-departmental working group to study technical, policy and legal issues.

While the HKMA has not yet decided whether to issue digital currency, Yue added, it is essential to increase technical readiness with research like that being undertaken by other central banks.

He also listed some of the important questions being posed: "How should we strike a right balance between privacy and traceability? How do we mitigate cybersecurity risks? How will it affect the effectiveness of monetary transmission?"

The answers, Yue said, are needed before a conclusion is reached.

Yue also said is too early to discuss whether Hong Kong will reclaim three lenders' right to issue banknotes as digital currencies could be issued by commercial banks.

But the e-HKD will not affect the Hong Kong currency peg to the US dollar, said deputy chief executive Howard Lee Tat-chi.

After launching digital Hong Kong dollar, people will be free to choose using other payment tools like cash, he added.

The HKMA will also continue to collaborate with the People's Bank of China in supporting the digital yuan trial in Hong Kong, which will provide a convenient means of cross-boundary payments.

The e-HKD study is among the monetary authority's Fintech 2025 Strategy, which was unveiled yesterday. Under the strategy, the authority will roll out a tech baseline assessment to take stock of banks' fintech adoption.

It will enhance the SAR's data infrastructure, including the Commercial Data Interchange, digital corporate identity and blockchain-based credit data-sharing platform to help with data sharing.

The authority also aims to expand the fintech talent pool by developing specific training programs and qualifications as well as promoting joint projects between the financial sector and academia.

A new fintech cross-agency co-ordination group will also be established by the monetary authority and the financial sector's key players to formulate support systems.

The Hong Kong Association of Banks said it welcomes the Fintech 2025 Strategy to reinforce Hong Kong's leading place in the global fintech scene.

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