Hong Kong is progressing into the next phase of technical testing for China’s digital currency, the digital yuan, broadening the trial to encompass additional Hong Kong-based banks.
The collaboration between the Hong Kong Monetary Authority (HKMA) and the People’s Bank of China has seen the successful completion of initial technical assessments focused on facilitating cross-border payments using the digital yuan within Hong Kong. This update was shared by Christopher Hui, the Secretary for Financial Services and the Treasury in Hong Kong, during a fintech gathering.
Hui further elaborated that they are currently in the midst of the trial’s second phase. This stage integrates a greater number of Hong Kong banks and examines the capability to replenish the digital yuan wallet via the Faster Payment System (FPS). He noted, “At present, the second phase of the technical trial is ongoing, which incorporates more banks from Hong Kong and explores the functionality of adding funds to the digital yuan wallet using the Faster Payment System.”
The Faster Payment System (FPS), a creation of the HKMA launched in 2018, is designed to simplify cross-bank transactions in either Hong Kong dollars or Chinese yuan. For these transfers, users only need the recipient’s email address or mobile phone number.
Recent data from Hong Kong Interbank Clearing Limited indicates that during this year’s second quarter, the FPS handled about HK$1 billion in Hong Kong dollar transactions. This figure is a notable increase from the HK$669.6 million transacted during the equivalent period in the previous year.
Christopher Hui emphasized the potential of the digital yuan, or e-CNY, suggesting that it promises to be a secure, innovative, and user-friendly mechanism for cross-border retail spending for inhabitants of both territories.
In elaborating on the larger implications, Hui observed that the digital currency would “boost the effectiveness and user-friendliness of cross-border payment services, thereby fostering stronger ties in the Greater Bay Area, which comprises Guangdong, Hong Kong, and Macau.”
Hong Kong’s extended testing of the digital yuan is indicative of China’s pioneering stance in Central Bank Digital Currency (CBDC) progression.
China has been at the forefront, initiating multiple pilot programs for its CBDC across a myriad of provinces. Remarkably, these trials have already engaged over 200 million participants.
Globally, the adoption of CBDCs is gaining momentum. Currently, 11 countries have officially rolled out their CBDCs. This list comprises China, The Bahamas, Nigeria, Anguilla, Jamaica, and a consortium of seven Eastern Caribbean nations.
Hong Kong Strives to Become Global Crypto Hub
Hong Kong is positioning itself as a central player in the cryptocurrency landscape, aligning its efforts with the burgeoning momentum of Web3 development.
The city-state recently rolled out an updated regulatory framework for cryptocurrencies. This refreshed set of rules paves the way for retail investors in Hong Kong to engage in trading certain “large-cap tokens” on approved exchanges. However, this comes with the stipulation that certain precautionary measures, including knowledge assessments, risk profiling, and setting of sensible exposure limits, are firmly instituted.
Further reinforcing this stance, the Securities and Futures Commission (SFC), which is Hong Kong’s chief financial oversight body, has been distributing licenses to crypto exchanges that comply with the updated licensing protocols. This move showcases Hong Kong’s dedicated push towards fostering a regulated and dynamic cryptocurrency environment.
In a recent development, the Securities and Futures Commission granted an approval-in-principle (AIP) license to SEBA Bank, a Swiss-based entity.
This endorsement empowers SEBA’s Hong Kong division to undertake a wide range of regulated operations. This encompasses dealing in securities, with a particular focus on virtual asset-related offerings such as structured products and over-the-counter (OTC) derivatives.
In a related update, the cryptocurrency exchange OKX is nearing the end of its journey to acquire a Virtual Asset Service Provider License (VASP) in Hong Kong, underscoring the city-state’s momentum in integrating and regularizing the crypto sphere.