Date: 19 December, 2023
Hong Kong’s financial landscape is poised for significant transformation as more banks gear up to participate in Mainland China’s digital yuan pilot program. The push for cross-border applications of China’s Central Bank Digital Currency (CBDC) has gained momentum, with plans to further expand participation, especially from overseas banks.
Hong Kong’s Digital Yuan Expansion: A Growing Cohort of Banks
According to Christopher Hui, Hong Kong’s Secretary for Financial Services and the Treasury, additional banks based in Hong Kong are set to join the digital yuan pilot. Hui revealed this development during a fintech conference in Shenzhen, emphasizing the aim to involve more local banks in the initiative.
Progress and Technical Testing
Hui highlighted the completion of the preliminary technical testing phase for adopting the digital yuan in cross-border payments. He also mentioned a subsequent stage of specialized testing between the People’s Bank of China (PBoC) and the Hong Kong Monetary Authority (HKMA).
Regulatory Adaptation for Innovative Applications
Acknowledging the need for updated regulatory protocols, Hui stressed the government’s commitment to supporting innovative cross-border applications of the digital yuan. The intention is to facilitate retail payments by leveraging Hong Kong’s fast payment system (FPS) in conjunction with the digital yuan.
Recent Entrants and Collaborative Efforts
HSBC, Hang Seng Bank, Standard Chartered, and Fubon Bank are recent entrants into China’s digital yuan pilot. Their participation signifies a growing interest among foreign banks in exploring the digital yuan landscape.
Cross-Border Initiatives and Greater Bay Area Influence
Hong Kong and Shenzhen have emerged as key players in expanding the digital yuan’s reach. The Guangdong-Hong Kong-Macao Greater Bay Area plays a pivotal role in supporting the cross-border exploration of digital currency, with Shenzhen positioned to create a model for digital yuan-powered cross-border payments.
Collaborative CBDC Projects for Cross-Border Payments
Projects like Cambridge, a collaborative effort between the HKMA, PBoC, Thai, and UAE central banks under the Bank for International Settlements, aim to streamline cross-border payments using international CBDCs. This initiative seeks to enhance regulated cross-border transactions, potentially minimizing unregulated payments.
As Hong Kong continues to deepen its involvement in the digital yuan pilot and explores collaborative initiatives, the evolving landscape hints at a transformative future for cross-border payments and financial innovation in the region.
References:
https://cryptonews.com/news/more-hong-kong-banks-set-to-join-digital-yuan-pilot-govt-confirms.htm