The Hong Kong Monetary Authority (HKMA) and the Digital Currency Institute of the People’s Bank of China (PBOC), are looking to expand the testing of China’s central bank digital currency (CBDC) for cross-border payments.
Hong Kong and China Preparing for More Digital Yuan Trials
According to Bloomberg on Thursday (May 13, 2021), the HKMA decided to moe forward with the digital yuan test, after the initial pilot phase was successful. The first phase of the eCNY trial involved selected merchants and a bank chosen by mainland Chinese authorities.
Back in December 2020, the HKMA and the PBOC announced that they were planning to test the digital yuan for cross-border settlements. With the success of the first cross-border trial, the HKMA is ready to enter the next phase of pilots, stating:
“We have tested the use of the related app, system connectivity and certain use cases such as cross-boundary purchases. We are discussing and collaborating with the PBOC on the next phase of technical testing, including the feasibility of broadening and deepening the use of e-CNY for cross-boundary payments.”
A recent report by leading consulting firm Oliver Wyman, stated that the use of China’s digital yuan could make cross-border settlements faster and cheaper. According to the report, cross-border payments in Hong Kong cost between $20 billion – $40 billion annually, which is equal to almost 11 percent of the city’s 2020 gross domestic product (GDP).
An excerpt from the report reads:
“The introduction of eCNY has the potential to elevate RMB to a new height. And with a nationwide roll-out now under a year away, financial players need to consider the impact now. With the potential for the new currency to move into cross-border transaction, supported by liberalization policy, RMB could become a true global trade that will bring savings and efficiency.”
China’s CBDC project continues to move at an accelerated pace, with different cities conducting multiple digital yuan trials via red packet airdrop events. Chinese financial institutions have also contributed to eCNY trials, by developing hardware wallets and mobile applications.
Meanwhile, China is aiming to expand the scope of its CBDC testing to foreigners. As reported by BTCManager back in April, the PBOC said that it was working towards testing its digital yuan with international visitors at the upcoming 2022 Beijing Olympics.