Hong Kong Expands China’s Digital Yuan Test, Launches Its Own CBDC

Hong Kong plans to expand the application scope of digital yuan. At the same time, Hong Kong is about to enter the second phase of the central bank digital currency (CBDC) pilot program and has completed a public consultation on the issuance of stable coins.

A few years ago, China made headlines for launching a digital yuan. It is one of the most high-profile central bank digital currencies to date and has been extremely successful. In fact, it was just announced that Hong Kong will help expand testing of the digital yuan. This comes as the first phase of the digital Hong Kong dollar is coming to an end.

Latest developments in digital renminbi

In a recent speech, Financial Secretary Paul Chan Mo-po announced that digital yuan users will be able to top up their wallets through the existing system. This will be done through the Faster Payment System (FPS) and is expected to facilitate more cross-border use of the digital yuan.

This is accomplished by using an email address and phone number to send funds from one wallet to another.

Furthermore, this is also seen as an effort to promote connections between mainland China and the rest of the world, which has always been a major focus of CBDCs. In addition to the development of the digital yuan, the Hong Kong Monetary Authority (HKMA) also released an update on its own CBDC.

This digital version of the Hong Kong dollar, called e-HKD, completed its first pilot testing phase in October 2023. Following this trial, the authority said it was reviewing the token’s retail use in situations such as “programmable payments, offline payments and tokenized deposits.”

Soon, it plans to launch the second phase of a pilot study that will focus not only on these retail uses but also other complex uses.

Hong Kong’s ambitious digital asset** plan**

In addition to working with China and its own CBDC, Hong Kong has launched several projects that show its ambitions for digital assets. These include the mBridge CBDC project, a collaboration between the Hong Kong Monetary Authority, the Bank for International Settlements, and the central banks of China, Thailand and the United Arab Emirates. The goal of the project is to facilitate cross-border payments through a common multi-CBDC platform.

In addition, Hong Kong issued the world’s first multi-currency tokenized bond in February 2023. 2 The second batch of tokenized green bonds was issued in February 2024. Chen Maobo pointed out that corporate institutions have shown great interest in both batches of bonds.

Finally, the Hong Kong Monetary Authority and the Ministry of Finance are conducting public consultations on the regulation of stablecoin issuance. All these efforts show that Hong Kong is seeking more development in the digital asset market and hopes to become a digital asset center in the future.

As other countries such as the United States and Canada join in seeking to issue their own CBDCs, we will wait and see who comes out on top.