Swift’s CBDC Connector Enters Beta Testing with Global Central Banks

Swift, the world’s leading provider of secure financial messaging services, has announced the beta testing of its innovative Central Bank Digital Currency (CBDC) interoperability solution. This move comes as part of Swift’s ongoing efforts to bridge the gap between digital and fiat-based currencies.

Global Participation in Swift’s CBDC Initiative

Three central banks, including the Hong Kong Monetary Authority (HKMA) and the National Bank of Kazakhstan, are currently integrating Swift’s CBDC connector solution into their infrastructure for direct testing. This follows Swift’s commitment to develop a beta version after the first sandbox testing phase, where participants acknowledged the solution’s “clear potential and value.”

Furthermore, over 30 financial institutions worldwide are participating in the second phase of sandbox experiments. This phase aims to explore additional use cases such as trigger-based payments for digital trade platforms, foreign exchange models, and liquidity saving mechanisms. Notably, the Reserve Bank of Australia, Deutsche Bundesbank, HKMA, Bank of Thailand, and CLS are among the institutions involved.

Addressing the Fragmentation Concern

According to The Atlantic Council, 130 countries, accounting for 98% of global GDP, are currently exploring CBDCs. Nineteen G20 countries are in advanced stages of CBDC development, with nine already piloting their digital currencies. However, the primary focus on domestic usage could lead to a fragmented landscape across borders.

Swift’s response to this potential fragmentation is a concentrated effort on interoperability for digital currencies and tokenized assets. Their goal is to ensure these digital assets can seamlessly integrate into the financial ecosystem when deployed. Swift’s CBDC initiative, which started over 18 months ago, saw almost 5,000 transactions simulated between two different blockchain networks and existing fiat-based payment systems during its first phase.

Swift’s Vision for the Future of Digital Currencies

Tom Zschach, Chief Innovation Officer at Swift, emphasized the company’s focus on interoperability. He stated, “Our focus is on interoperability – ensuring that new digital currencies can seamlessly coexist with each other and with today’s fiat-based currencies and payment systems.” Zschach also highlighted the financial community’s recognition of Swift’s CBDC innovations, which aim to prevent “digital islands” while securely bridging current and future payment systems.

Swift is proactively embracing blockchain and CBDC, recognizing that blockchain has the potential to revolutionize its current system. As reported by Blockchain.News, Swift, in collaboration with major banks and Chainlink, announced successful experiments on August 31, 2023, to transfer tokenized assets across multiple blockchains. The initiative aims to address interoperability challenges hindering tokenized asset market growth. Swift’s infrastructure can act as a central point for financial institutions transferring tokenized assets, ensuring global interoperability. Tom Zschach of Swift emphasized the importance of interoperability and Swift’s role in facilitating global value transfer.

About Swift

Swift is a global member-owned cooperative, providing a platform for secure financial messaging. Connecting over 11,500 banking and securities organizations in more than 200 countries, Swift facilitates global and local financial flows, supporting trade and commerce worldwide. While it doesn’t hold funds or manage accounts for customers, Swift ensures secure and standardized financial message exchanges. Headquartered in Belgium, Swift maintains a strong presence in major financial centers globally, emphasizing its neutral, global cooperative structure.

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HK’s Official Blockchain Platform eTradeConnect to Terminate Operations

The Hong Kong Monetary Authority (HKMA)-backed eTradeConnect, a trade finance platform built on blockchain technology and supported by a group of twelve prominent banks, is set to cease operations by month’s end. Launched officially on October 31, the platform’s primary functions were to digitalize trade documents, streamline trade finance operations, and utilize blockchain capabilities to bolster efficiency and foster trust within the trade community.

Its origins date back to October 2017, when the HKMA unveiled plans for this trade finance venture, buoyed by the positive outcomes of a preliminary proof-of-concept test. Initially dubbed the Hong Kong Trade Finance Platform, eTradeConnect marked a significant stride for the city, being its inaugural multi-bank blockchain project.

The collaborative effort began with seven leading banks, such as Bank of China (Hong Kong) Limited and Hang Seng Bank Limited. This group later grew with the inclusion of five more banks, culminating in a consortium of twelve.

In a bid to facilitate cross-border trades, the HKMA had previously sought opportunities to connect eTradeConnect with trade platforms in other regions. A notable development was the signing of a Memorandum of Understanding between eTradeConnect and Europe’s we.trade platform to conduct a trial on connecting the two platforms. This collaboration aimed to pave the way for the digitalization of cross-border trades in the Asia and Europe trade corridor.

Deputy Chief Executive of the HKMA, Mr. Howard Lee, had remarked on the significance of the platform, emphasizing its role in the new era of smart banking and the potential for connecting with other global trade finance platforms.

However, despite its promising start and the potential for bridging trade finance barriers between Europe and Asia, eTradeConnect has seen a decline in usage, leading to its impending closure. The platform’s official website has confirmed the termination of its services, with further plans to terminate the platform trademarks and the website domain after Q3 2024.

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Hong Kong Monetary Authority Emphasizes AI and DLT in Fintech Roadmap

With the release of the Hong Kong Monetary Authority’s (HKMA) most recent Fintech Promotion Roadmap today, on 25 August 2023, the financial environment in Hong Kong is poised to be more attractive. This thorough manual presents a strategic outlook for the next year with the goal of promoting fintech adoption across the region’s diversified financial services industry.

The Roadmap accentuates pivotal fintech business sectors, primarily Wealthtech, Insurtech, and Greentech. Furthermore, it brings to the forefront two revolutionary technology paradigms: Artificial Intelligence (AI) and Distributed Ledger Technology (DLT), the underlying technology of blockchain. The drafting of this Roadmap was not an isolated endeavor. The HKMA joined forces with the Securities and Futures Commission, the Insurance Authority, and a spectrum of stakeholders from various financial sectors to ensure a holistic representation.

Delving deeper into the Roadmap, the initiatives of the HKMA are not limited to merely advocating fintech’s potential. Instead, there’s a distinct shift towards a hands-on approach, facilitating financial institutions in their journey to translate fintech theories into tangible solutions. Over the ensuing 12 months, the HKMA has earmarked a slew of activities:

  1. Fintech Knowledge Hub: Aimed to be a reservoir of fintech expertise, this hub will feature a directory, categorizing fintech service providers and financial institutions. This endeavor seeks to centralize resources, rendering them easily accessible for all fintech stakeholders.
  2. Events and Dialogues: With a commitment to nurturing a symbiotic relationship between financial institutions and fintech service providers, the HKMA envisions regular showcase events and roundtable discussions. These platforms will not only foster collaboration but will also be crucibles for innovation.
  3. Skill Development: Recognizing the importance of continuous learning in a rapidly evolving domain, the HKMA will orchestrate interactive seminars and training sessions. These sessions, tailored to address specific fintech niches, are poised to become knowledge transfer hubs, catalyzing cross-sectoral information exchange.
  4. Content Creation: To ensure that the intricacies of fintech adoption are well-understood, the HKMA has plans to curate and disseminate educational content. This will span use-case videos to research reports, providing a 360-degree view of the fintech adoption spectrum.

Offering insights into the motivation behind this initiative, Mr. Arthur Yuen, Deputy Chief Executive of the HKMA, was quoted saying, “The unveiling of this Roadmap is not just a milestone for the banking sector, but a beacon for the entire financial services industry. The underpinning philosophy of our Roadmap is collaboration. We’re looking beyond banking, casting a wide net to encompass sectors like insurance, wealth management, and capital market activities. Through synergies with other financial regulators and continuous engagement with stakeholders, our vision is a resilient, inclusive fintech ecosystem for Hong Kong.”

This initiative is not an isolated one. It dovetails perfectly with the overarching “Fintech 2025” strategy of the HKMA. This strategy germinated the “All banks go Fintech” initiative in 2021, a clarion call for banks to embrace digitalization. A subsequent Tech Baseline Assessment in June 2022 crystallized the growth trajectories in Wealthtech, Insurtech, Greentech, AI, and DLT. These insights were instrumental in sculpting the current Roadmap.

For those keen on delving into the granular details of the Roadmap and to understand the breadth of initiatives by the HKMA, the recently unveiled report is a treasure trove of information.

As Hong Kong stands at the cusp of a fintech revolution, the Roadmap by the HKMA is set to be its compass, guiding stakeholders through the labyrinth of fintech adoption, ensuring that Hong Kong retains its position as a global fintech center.

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Hong Kong Monetary Authority Explores Virtual Asset Regulation in UAE and Highlights Converging Global Standards

According to a report by Ming Pao, the Hong Kong Monetary Authority (HKMA) recently visited the United Arab Emirates (UAE) to discuss the regulation of virtual assets (cryptos) with the local central bank. HKMA Chief Executive Eddie Yue shared that both regions have begun developing virtual assets within regulated environments, with Hong Kong having introduced regulatory frameworks earlier than the UAE. 

Yue also mentioned the recent strengthening of virtual asset regulation in the United States, raising questions about whether other jurisdictions, including Hong Kong, would follow suit or adopt a more relaxed approach. He noted that in the past, Hong Kong had stringent regulations on virtual assets, bordering on prohibition, while regulations in other regions were relatively unclear. However, there is now a global trend towards converging regulatory standards, which will help minimize potential discrepancies in the future.

Eddie Yue also discussed the challenges faced by virtual asset exchanges in Hong Kong when it comes to opening bank accounts. Yue acknowledged that there have been ongoing discussions between the HKMA and local banks regarding this issue. He mentioned that the perception of pressure during these discussions varied among different parties. Yue explained that while the United States previously lacked clear regulatory requirements for virtual assets, places like Singapore and Dubai had regulations in place, particularly targeting functions such as anti-money laundering. Hong Kong, after learning from experiences such as the closure of FTX, has gradually opened up its regulatory approach, aiming for strict yet clear guidelines. The banking industry is encouraged to continuously update its understanding and seek regulatory clarity from authorities.


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UAE Central Bank and Hong Kong Monetary Authority Bolster Financial Ties

The Central Bank of the United Arab Emirates (CBUAE) and the Hong Kong Monetary Authority (HKMA) convened a bilateral meeting on May 29, intending to amplify cooperation in the financial services arena between the two regions.

The CBUAE and HKMA deliberated over numerous collaborative strategies during the meeting and consented to augment cooperation in three pivotal areas: financial infrastructure, financial market connectivity between the two regions, and virtual asset regulations and developments. Moreover, the two central banks facilitated dialogue between their respective innovation hubs to propel fintech development initiatives and knowledge sharing efforts.

To advance the agreed initiatives, a joint working group led by the CBUAE and HKMA will be established, supported by the relevant stakeholders from the banking sectors of both jurisdictions.

Following the bilateral meeting, the two central banks, along with high-level executives from banks in the UAE and Hong Kong, held a seminar exploring key opportunities between the two regions. Topics of discussion encompassed possible arrangements to enhance cross-border trade settlement, ways UAE corporations can better access Asian and Mainland markets through Hong Kong’s financial infrastructure platforms, and financial and investment solutions, along with capital market opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area.

Banks from the UAE including the First Abu Dhabi Bank, Abu Dhabi Islamic Bank, Emirates NBD, Industrial and Commercial Bank of China, Bank of China, HSBC, and Standard Chartered participated in the seminar. From Hong Kong, the Bank of China, Citi, HSBC, and Standard Chartered joined the discussion.

“We are delighted to welcome the Hong Kong Monetary Authority and its delegation to the UAE, as we aspire to build on our central banks’ existing and robust relations,” said H.E. Khaled Mohamed Balama, Governor of the CBUAE. “During today’s discussions, we explored intensifying collaboration across several key areas, including financial market infrastructure development and mutual opportunities for growth in digitization and technological advancement.”

H.E. Balama added, “We anticipate a longstanding engagement with the HKMA and the broader Hong Kong financial services sector. We will continue collaborating with and exchanging knowledge in these areas of mutual interest.”

Eddie Yue, the Chief Executive of HKMA, stated, “These events have enhanced collaboration between the central banks of Hong Kong and the UAE in several crucial areas, providing a platform for financial institutions and corporations from both regions to augment exchange and collaboration. Hong Kong and the UAE, as financial centers, share many complementary strengths and mutual interests. There is ample scope for market participants from both places to collaborate and build connectivity.”

Yue added, “We look forward to continued collaboration with the CBUAE, increased exchange between the financial sectors of Hong Kong and the UAE, and welcome the visit of UAE stakeholders to Hong Kong in the near future.


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Hong Kong Central Bank Urges Crypto-Friendly Banking

The Hong Kong Monetary Authority (HKMA) has issued a circular on April 27th instructing authorized institutions, also known as “AIs,” to provide banking services to cryptocurrency firms while adopting a risk-based approach to Anti-Money Laundering (AML) measures. This circular comes as a significant move towards legitimizing cryptocurrencies in the region and bridging the gap between traditional banking and the rapidly growing digital assets industry.

The HKMA’s directive is part of its broader efforts to regulate the cryptocurrency market in Hong Kong, a region that has been grappling with the lack of clarity surrounding cryptocurrencies and their legal status. This directive requires authorized institutions to assess the risks associated with each corporate customer, including cryptocurrency firms, and implement appropriate measures to mitigate those risks.

This move is a critical step towards the integration of cryptocurrencies into the mainstream financial system in Hong Kong, where digital assets have long struggled to gain legitimacy. Cryptocurrency firms in Hong Kong have often faced significant challenges in accessing banking services, leading to operational difficulties, stifling innovation, and impeding growth. With this new directive, the HKMA aims to ensure that cryptocurrency firms can access necessary banking services, enabling them to operate efficiently and safely within the existing regulatory framework.

The HKMA has been actively working towards regulating the cryptocurrency market in the region, with plans to launch its own central bank digital currency (CBDC) in the coming years. The HKMA’s efforts to regulate the cryptocurrency market, coupled with its CBDC initiative, highlight the region’s increasing interest in the digital assets industry and its potential to transform the traditional financial system.

In conclusion, the HKMA’s directive to authorized institutions to provide banking services to cryptocurrency firms is a significant move towards legitimizing cryptocurrencies in Hong Kong. This directive will not only help bridge the gap between traditional banking and the digital assets industry but will also enable cryptocurrency firms to access necessary banking services, leading to operational efficiencies and growth. With the HKMA’s increasing interest in the digital assets industry, we can expect to see further developments in the coming years, ultimately leading to the integration of cryptocurrencies into the mainstream financial system.


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E-HKD’s Development in Hong Kong- The Future Way of Currency?

A study shows that 90% of surveyed central banks worldwide are exploring the future issuance of central bank digital currencies (CBDCs). Blockchain.News interviewed industry experts to find out the outlook of Hong Kong’s digital currency and its potential adoption.

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The outlook of e-HKD

In a recent discussion paper published by The Hong Kong Monetary Authority (HKMA), the local regulator reached out to the public to consult the development of retail central bank digital currency (rCBDC) or the digital Hong Kong Dollar (e-HKD). The discussion paper lists a wide range of issues and a dozen of key questions covering a wide range of issues:

  •  The potential benefits and challenges of e-HKD
  •  The balance between privacy and illicit activities prevention
  •  Interoperability with the existing payment system
  • Considerations in terms of legal, design and policy perspectives respectively
  • The level of participation by the private sectors. 

The role of e-HKD

The rCBDCs can be divided into two-tier distribution models: the wholesale interbank system and the retail user wallet system, according to the e-HKD technical whitepaper.

The wholesale CDBC is used for transfers between the central bank and commercial banks or other institutions, while the retail CDBC is used for transfers between commercial banks and the general public for retail transactions, Professor Chew Seen-Meng, Associate Professor of Practice in Finance and Associate Dean (External Engagement) of the Chinese University of Hong Kong (CUHK) explained.

Regarding retail CBDCs, a doubt that could arise among the public could be why does the market still need another digital payment tool among other diverse options in HK?

Chew, the former economist for the Singapore office of the International Monetary Fund (IMF) and Morgan Stanley, acknowledged that “it is true that there is no urgent need for a digital HKD.”

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However, “having an e-HKD could make our lives even more convenient by eliminating the need to carry physical notes and coins around and enables virtually all payments to be made by just tapping the mobile phone” in the long term, Chew said.

Moreover, “the transmission mechanism of monetary policies from the HKMA can become more efficient through the e-HKD,” Chew added.

Furthermore, the scholar believes digital currency could provide a faster and more convenient way to transfer value by supporting more economic activities potentially if the digital currency is accepted as a medium of exchange by the public in the long term.

Currently, a plethora of payment platforms has already captured the market.

E-wallets with Peer-to-Peer (P2P) payment functions are becoming mainstream in Hong Kong.

In e-commerce alone, digital wallets are expected to account for 40 % of the city’s online transaction value by 2025, overtaking credit cards, according to the 2022 Global Payments Report by the US financial technology company FIS.

In an exclusive interview with Blockchain.News, Etelka Bogardi- Partner of Asia lead of Global Payments and Fintech Practice, Norton Rose Fulbright Hong Kong, told Blockchain.News that “one of the primary design considerations should be interoperability with existing systems.”

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Bogardi, a Hong Kong-based financial services regulatory lawyer and the former Senior Counsel to the Hong Kong Monetary Authority, suggests the regulator should aware of the effect of the e-HKD on banks and any potential disintermediation effects, given Hong Kong’s status as an international financial centre and the large presence of the financial sector.

Meanwhile, Chew also shared a similar view and added that “the administration needs to fully ensure and secure before e-HKD is launched.”

“Unless e-HKD can address some pain points of the current e-Payment services or is much more convenient than the existing e-Payment options, it would be hard for e-HKD to be embraced by the public among the plethora of retail payment options in Hong Kong,” Etelka added.

Through the paper, the HKMA reiterates that “the purpose of developing e-HKD is not to replace existing payment methods” but to “avoid creating a closed-loop payment system, which impedes payments made between e-HKD users and users of other payment systems.”

The rCBDC is expected to provide connectivity among other payment service providers, for instance, cross-platform payments to be conducted efficiently.

Token-based or Account-based?

The balance between privacy protection and data access is another crucial consideration among systematic issues. The discussion paper mentioned that the key design feature of e-HKD to consider is whether it is issued token-based or account-based.

According to the paper, the token-based would allow more anonymity in payments between various parties, protecting against abuse of individual data by commercial entities. Still, it could be risky to facilitate illicit activities.

The account-based approach, on the other hand, would “require the recording of balances and transactions of rCBDC holders. This approach would rely on the ability to verify the identity of the account holder and could help comply with AML/CFT requirements.”

Both approaches require a ledger to complete transactions with distributed ledger technology (DLT) and tokenization, which could be structured to trace users depending on the degree of anonymity and access of information to parties.

However, Prof. Chew said that the traceability of digital currency from the regulator indicates that small retailers such as taxi drivers might be reluctant or not interested in changing their behaviours or habits of transactions due to taxation concerns.

“Since the e-HKD’s value will be controlled by the HKMA, it is already a kind of stablecoin. To the extent that the HKMA is able to maintain the stability of e-HKD’s value through algorithms or its forex reserves, the risk of the e-HKD plummeting in value should be quite small.”  

The regulator said the “full anonymity is not plausible,” e-HKD should comply with existing law and ordinances. Its legal mandate and legal tender status would logically align with the currency system.

“Overall, whilst there would need to be some work done to accommodate an e-HKD in the existing legislative framework of currency issuance and related issues, these are not insurmountable obstacles. Some of the more technical legal issues raised relate to the application of effective AML controls and data privacy laws. In that sense, the discussion around having a two-tier issuance and distribution structure is very beneficial,” Etelka explained.

Global adoption of CDBCs

Over the past two years, the global market was trapped by uncertainties amid the COVID-19 pandemic.

Amid the turmoil, the increasing demand for raising cross-border payments efficiency and the emergence of cryptocurrencies, such as stablecoins and other tokens, also gave rise to regulatory challenges, pushing global governments to update their currency policy in response.

According to the latest report published by the Bank of International Settlement (BIS), 90% of surveyed central banks worldwide are exploring the issuance of central bank digital currencies. The financial institution added that around two-thirds of central banks surveyed would take issuing retail CBDC into account in the near future.

The Bahamas became the first sovereign nation to issue CBDC since 2020, called the “Sand Dollar”, as the pioneer in adopting a new form of currency, driven by its geographical and the cost of delivering currency on its land.

“In countries with a weak currency or underdeveloped financial system, and a large unbanked population, the CBDC is more useful and can be more easily adopted by its citizens,” Chew explained.

Yet, the SAND Dollar’s potential benefits did not live up to its expectation.

A report from the IMF indicates that the island nation’s adoption of the SAND Dollar is merely less than 0.1% of the currency in circulation.

The issue of financial inclusion continuously troubles this Caribbean nation. World Bank defines financial inclusion as the access of individuals and businesses to valuable and affordable financial products and services for their financial that need to be delivered responsibly and sustainably. The Bahamas is also desperately to improve its cybersecurity for its digital currency.

Bogardi believes Hong Kong’s market enjoys a unique position with a well-developed retail payment landscape:

“Issues of financial inclusion are perhaps not as relevant as other jurisdictions who have chosen to press ahead with CBDCs (e.g. Bahamian Sand dollar).   As a result, it is correct that the focus of the HKMA’s exploration of the e-HKD is as a conduit to fuel digital innovation in Hong Kong, and to help position it for potential challenges from new forms of payment means such as stablecoins.”

Regionally, China has been conducting a wide range of digital Yuan (e-CNY) pilot tests since 2020, developed by the People’s Bank of China (PBoC).

The administration rolled out a massive pilot test during its Beijing Winter Olympic Games and currently, the e-CNY app is one of the most downloaded apps in the country. The app has recorded over 83 million downloads through iOS and Android systems so far.

“In China, electronic payments have been dominated by Alipay and WeChat Pay for several years now. The central government is keen to introduce the e-CNY to maintain control of the monetary system before private firms like Alibaba and Tencent become too influential in the country’s payment system. Since it is a large country, it has to do many pilot tests in numerous cities so that citizens can familiarize themselves with the e-CNY before it is officially launched, and this of course will take some time, “Chew said.

On the other hand, experts suggest geopolitical factors, such as war, might also accelerate the progress of CBDC issuance.

While the objective of introducing the CBDC among other countries or regions could be different, the HKMA has disclosed that “it is inclined towards the Coins-approach under which e-HKD would be solely issued by one single authority” in the long term.

By adding that, looking for tasking agent banks to handle all customer-facing activities relating to the distribution of e-HKD.

“If the technology is ready, the HKMA can consider doing some pilot tests in several stages to let Hong Kongers try out the e-HKD on their mobile phones so that they can familiarize themselves with it and learn about its usefulness,” said Prof. Chew.

The HKMA has reiterated that it has not yet decided on introducing the e-HKD.

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Hong Kong Resumes Discussion on Stablecoin Regulation, Offering 5 Options to the Public

In order to make its stance known about stablecoins, the Hong Kong Monetary Authority (HKMA) has published a discussion paper in which it is soliciting the public’s contributions to its proposed regulatory approach to digital currencies and stablecoins in particular.

Per the published paper, the HKMA acknowledged the steady growth in the market capitalization of stablecoins which is pegged close to $150 billion, up significantly from less than $20 billion back in January 2020.

The growth of stablecoins has been seen by many regulators as a source of potential threat to financial stability, and some especially China has moved to ban all related digital assets. The request for comments by the HKMA is hinged on 8 salient questions that can eventually drive one of 5 outcomes, including “no action”, “opt-in regime”, “risk-based regime”, “catch-all regime”, and “blanket ban”. 

Each of these outcomes has its features and potential downsides. The no-action call for instance can fuel the sustenance of the status quo with the inherent risks growing and eventually affecting the broader financial ecosystem. The risk-based regime will see comprehensive regulatory coverage to address risks in a broader sense. The downside to this regime will be the regulatory and supervisory costs with a number of risks still existent.


Source: HKMA

The advent of stablecoins – digital currencies that have no volatility – has changed many narratives in the $2 trillion cryptocurrency industry. These tokens, the most common of which is Tether (USDT), USDC, and BUSD, are now being used as the fiat in the crypto trading world, as a lending asset in decentralized finance (DeFi), a use case that has stirred the influx of both retail and institutional investors into the space.

Despite this growth, the discussion paper noted that;

“The growing exposure of institutional investors to such assets as an alternative to or to complement traditional asset classes for trading, lending and borrowing […] indicate growing interconnectedness with the mainstream financial system.”

Joining other nations, including the U.S. in pushing for a stablecoin regulation, the HKMA plans to bring the regulations to life by 2023/24, the HKMA is giving the public up to March 31st this year to submit their responses.

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HKMA Releases Whitepaper on Proposing the issue of CBDC: e-HKD

The Hong Kong Monetary Authority (HKMA) has published a Technical Whitepaper to discuss the possibility of the digital Hong Kong Dollars (e-HKD) issue as part of its efforts to come up with an initial view regarding the prospects of its proposed Central Bank Digital Currency (CBDC) by the middle of next year.

The Whitepaper is part of the central bank institution’s projected “Fintech 2025” strategy, highlighting one strategic direction to strengthen research work on CBDC with a view to future-proofing Hong Kong in terms of CBDC readiness.

According to the HKMA, the Whitepaper explores potential technical design options for issuing and distributing retail CBDCs. The apex bank noted that the Whitepaper will be the first of a slew of other papers that are on track to be released to showcase a “technical architecture that includes a groundbreaking privacy preservation arrangement that allows transaction traceability in a privacy-amicable manner.”

Eddie Yue, Chief Executive of the HKMA, said:

“The Whitepaper marks the first step of our technical exploration for the e-HKD. The knowledge gained from this research, together with the experience we acquired from other CBDC projects, would help inform further consideration and deliberation on the technical design of the e-HKD. We also look forward to receiving feedback and suggestions from academia and industry to enrich our perspectives,” 

No timelines were defined yet as to when the e-HKD will be launched, as the HKMA noted that further legal and policy frameworks will have to be designed to back any affirmative decision to launch the CBDC.

The race to launch a CBDC has become one of the primary targets for a number of Central Banks around the world nowadays. While the People’s Bank of China (PBoC) is pioneering the retail trials of its Digital Renminbi (e-CNY) amongst the largest economies, American lawmakers are notably demanding a timeline on the Federal Reserve’s planned release of its consultative paper on a potential Digital Dollar.

With the CBDC race intensifying, the PBoC’s assertions that digital fiat currency becoming a “new battlefield” amongst sovereign countries coming to fruition is now more likely than ever.

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Hong Kong Lists CBDC Development as Strategy Fintech 2025 Roadmap

The Hong Kong Monetary Authority (HKMA) has outlined its new technological development roadmap dubbed the ‘Fintech 2025’. It aims to develop Fintech and digital currency, Hong Kong’s version of Central Bank digital currency (e-HKD). 

Per the published report, the apex monetary authority seeks to drive the financial sector to adopt technology in its entirety by 2025 ultimately. The areas it looks to overhaul, Central Bank Digital Currency (CBDC) pursuit or e-HKD, are vital aspects. Other strategic sectors include planning for all banks to go Fintech, creating a futuristic data infrastructure, growing the tech-savvy workforce and the rollout of funding, and the right policies to aid growth.

Hong Kong is one of the Asian cities that have already researching to develop a government-backed digital currency. Per the Fintech strategy, the HKMA said it would “strengthen its research work to increase Hong Kong’s readiness in issuing CBDCs at both wholesale and retail levels.”

The development of the Digital Hong Kong Dollar has been progressing with collaborations from the Bank for International Settlements (BIS) and the People’s Bank of China (PBoC). The apex bank also has a functional pact with the Bank of Thailand per the CBDC development. These collaborations, the HKMA says it will continue to cooperate.

“In addition to the continued effort on wholesale CBDCs, the HKMA has been working with the Bank for International Settlements (BIS) Innovation Hub Hong Kong Centre to research retail CBDCs and will begin a study on e-HKD to understand its use cases, benefits, and related risks,” the HKMA said in the statement, adding “The HKMA will also continue to collaborate with the People’s Bank of China in supporting the technical testing of e-CNY in Hong Kong to provide a convenient means of cross-boundary payments for both domestic and mainland residents.”

Many countries are making advances in positioning their fiat currency in readiness to absorb CBDCs. The United States of America, China, Sweden, and the United Kingdom are the latest names with active digital fiat currency developments. At the same time, these countries take a multi-year route to debut their cryptocurrencies competitors. Meanwhile, El Salvador has become the first country to adopt Bitcoin (BTC) as its official legal tender. 

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