Hong Kong Embarks on New Phase of CBDC Testing

CBDC Hong Kong Testing

The Hong Kong Monetary Authority (HKMA) has announced the commencement of the second phase of its central bank digital currency (CBDC) pilot, the e-HKD. This move marks a significant step forward in the exploration of digital currencies and their potential applications.

The second phase of the e-HKD pilot will build upon the learnings from the first phase, delving deeper into select pilots where an e-HKD could add unique value. The focus areas include programmability, tokenization, and atomic settlement. Moreover, the HKMA will explore new use cases that were not covered in the previous phase.

The first phase of the pilot program, which was completed recently, tested the use of a CBDC in domestic retail payments, offline payments, and the settlement of tokenized assets. The continuation of testing in the second phase signifies the HKMA’s commitment to exploring the potential of a digital version of the Hong Kong dollar.

Earlier this month, the HKMA launched a regulatory sandbox project to test CBDCs for wholesale use and tokenization. This project is expected to support the second phase of the e-HKD pilot, providing a controlled environment for testing the wholesale applications of CBDCs and the process of tokenization.

Hong Kong is among over 100 jurisdictions worldwide that are exploring the issuance and applications of CBDCs. Some regulators believe that reliable central bank money could compete with payments-focused private cryptocurrencies such as stablecoins. The exploration of CBDCs represents a global interest in leveraging the benefits of digital currencies while mitigating the risks associated with private cryptocurrencies.

The HKMA has invited organizations interested in participating in the pilot to apply by May 17. This opportunity allows various stakeholders to contribute to the development and testing of the e-HKD, fostering a collaborative approach to the exploration of digital currencies.

In conclusion, the launch of the second phase of the e-HKD pilot by the HKMA marks a significant milestone in the exploration of CBDCs. With a focus on programmability, tokenization, and atomic settlement, the pilot is poised to uncover new possibilities for digital currencies.

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