Hong Kong to broaden e-CNY pilot in move to boost cross-border payment efficiency

Hong Kong plans to expand the pilot scope of e-CNY, China’s central bank digital currency (CBDC) in trial, to enhance cross-border payment efficiency, according to the government’s latest budget.

Paul Chan, the financial secretary of Hong Kong, said in his budget speech on Wednesday that the government plans to expand the pilot testing of the digital yuan so more residents in Hong Kong may top up their e-CNY wallets through the local existing “Faster Payment System” (FPS). 

FPS is a real-time payment settlement system that allows users to make cross-bank e-wallet payments by entering the mobile phone number or the email address of the recipient.

The Hong Kong Monetary Authority, Hong Kong’s de facto central bank, completed the first-phase pilot of its CBDC, the e-HKD, in October 2023, and has “studied domestic retail use cases in various areas such as programmable payments, offline payments and tokenized deposits,” according to Chan. The HKMA plans to “soon commence” the second phase of its e-HKD pilot.

A multi-CBDC platform

The HKMA has also been engaged in the mBridge CBDC project, which is set to launch the first phase of its service this year, according to the budget speech. The mBridge project is initiated by the Bank for International Settlements, the HKMA and the central banks of China, Thailand and the UAE to experiment with a common multi-CBDC platform for wholesale cross-border payments.

Meanwhile, Hong Kong issued the second batch of tokenized green bonds earlier this month after it issued the first batch in February 2023, Chan added. That was “the world's first-ever multi-currency tokenized bond issuance,” and has attracted “overwhelming subscription” by global institutional investors, including asset managers, insurance companies, private banks and non-financial corporates, he said.

Chan also noted that Hong Kong plans to soon roll out a sandbox for those interested in issuing stablecoins. In December, the Financial Services and the Treasury Bureau and the HKMA jointly launched a consultation — until Feb. 29 — on regulating stablecoin issuers. They proposed that all fiat-referenced stablecoin issuers should obtain a license from the HKMA.