The Hong Kong Monetary Authority (HKMA) has published a paper outlining the findings of a study looking at the prospect of issuing retail CBDC (rCBDC) in Hong Kong.
The research on rCBDC was against the backdrop of heightened international attention to enhancing cross-border payments and remittances. The HKMA announced in June 2021 that it has embarked on an rCBDC project, Project e-HKD, with a near-term objective of formulating an initial view on the direction to pursue after identifying and considering the key issues involved.
Currently, less than a quarter of the central banks around the world are developing or are putting their rCBDC into the test. The Bahamas (Sand Dollar) and Nigeria (eNaira) have already launched their live rCBDC. While Mainland China (e-CNY) and the Eastern Caribbean (DCash) have released the pilot version of their rCBDC.
The bulk of the paper was devoted to responses to the previous papers, one of which was a request for comments on the technical aspects of the rCBDC, while the other dealt with policy and design. Between them, the papers received 75 responses from stakeholders.
Overall, the feedback indicated that respondents were supportive of the e-HKD initiative and believed that rCBDC has the potential to make payments more efficient while supporting the digital economy.
While the paper plainly admitted that the e-HKD might not have an imminent role to play in the current retail payment market, the use cases for e-HKD will emerge quickly out of the rapid evolution of the digital economy.
CBDCs are also considered by the international financial community to be an anchor of stability in the crypto and decentralized finance space
The proposed rCBDC would have a two-tier structure consisting of a wholesale interbank system and the retail user wallet system.
The paper also considered the legality and recognition of the rCBDC. Current legislation is not adequate and certain enough to accommodate the issuance of a digital form of legal tender.