The Hong Kong financial authorities have announced the second phase of trials of digital currencies in mainland China. As part of an upcoming test, the city will link the Chinese digital renminbi with its domestic payment system to evaluate the usability of CBDC in cross-border scenarios.
Hong Kong residents load e-renminbi wallets via mobile phones
China has made great progress in promoting the development and implementation of central bank digital currency (CBDC). Although Beijing officials stated that the electronic renminbi is a domestic project at this stage, the cross-border pilot has been launched in the Hong Kong Special Administrative Region.
According to Reuters, the latest round of tests will examine how Hong Kong residents can use the city’s faster payment network to load electronic renminbi wallets after initial small-scale trials of digital renminbi wallets. The system is currently processing domestic payments ordered via mobile devices.
The new test was announced at a press conference on Tuesday. Nelson Chow, Chief Financial Technology Officer of the Hong Kong Monetary Authority (HKMA), said in an interview with the media, “This will help Hong Kong residents use electronic renminbi when crossing the border.”
The HKMA will review the feasibility of a retail-focused CBDC
The HKMA has previously revealed that it is working to implement CBDC to simplify cross-border inter-bank payments. This week, the regulator said it would release a document within a year to explore the feasibility of a retail-focused CBDC.
The document will examine potential use cases for the electronic Hong Kong dollar that Hong Kong may decide to create. The Hong Kong Central Banking Agency added that issues related to data privacy and anti-money laundering standards will also be the focus of research. The Chief Executive Officer of the HKMA Yu Dehua commented:
People are more accustomed to digital payments now, if other central banks are exploring possible use cases for CBDC… you have to try to see if you can succeed.
The report further pointed out that the HKMA continues to conduct cross-border CBDC trials in parallel with other consumer-centric projects. The central banks of China and the United Arab Emirates joined the wholesale CBDC pilot conducted by the Monetary Authority and the Bank of Thailand earlier this year.
At the same time, the People’s Republic of China has been advancing its own digital currency test. This month, the authorities in the capital Beijing and Shanghai announced plans to distribute digital renminbi worth more than 9 million U.S. dollars through red envelope lottery tickets. Winners who receive the handout will have the opportunity to spend money at merchants that have accepted CBDC payments.
Do you think China plans to expand the use of digital renminbi in cross-border transactions? Share your thoughts on this topic in the comments section below.
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