The Hong Kong Monetary Authority (HKMA) launched the second phase of its central bank digital currency (CBDC), e-HKD, on September 23. This phase involves 11 firms from different industries exploring using e-HKD and tokenized deposits and testing their feasibility in real-world situations.
The second phase will focus on three key aspects: settlement of tokenized assets, offline payments, and programmability. These firms aim to evaluate the practical viability of the e-HKD system, determining whether it can successfully operate in various sectors. The outcome will influence the future of the HKMA’s plans to implement a full-scale digital currency ecosystem in Hong Kong.
Key participants in Phase 2
Several prominent organizations are participating in the e-HKD pilot’s second phase. These firms include well-known financial institutions such as ANZ, DBS, and BlackRock, as well as companies from various industries like China Mobile and Airstar Bank. Additionally, some firms that participated in the first phase, such as HSBC and Mastercard, have been invited to continue their involvement in Phase 2.
This phase will run for up to 12 months, with results expected by the end of 2025. The HKMA will evaluate the data to understand the practical challenges of implementing both publicly and privately issued digital money. For example, Mastercard and BlackRock will collaborate with Standard Chartered to test e-HKD for the trading and settlement of tokenized assets. On the other hand, the Bank of Communications and China Mobile will focus on using SIM cards to enable offline payments.
Rebranding of the e-HKD project
In line with the project’s expansion, the HKMA has rebranded it as “Project e-HKD+.” This new title reflects the broadening scope of the initiative, which now includes exploring tokenized deposits and integrating more components of the digital money ecosystem. The CEO of HKMA, Eddie Yu, emphasized the authority’s commitment to unlocking the full potential of digital currencies, stating that the pilot program provides a vital opportunity for regulators to collaborate with industry players.
In addition to renaming the project, the HKMA has plans to set up an industry forum for e-HKD. This forum will bring together all firms involved in the pilot program, providing a platform to discuss and resolve any challenges faced during the testing process.
Crypto adoption on the rise in Hong Kong
Hong Kong’s digital currency initiatives coincide with the region’s growing prominence as an Asian crypto hub. While mainland China has imposed stringent restrictions on cryptocurrencies, Hong Kong has emerged as a key player for crypto investors, particularly in Greater China.
Recent data from Chainalysis revealed that Hong Kong, alongside South Korea, is one of the leading areas driving the crypto economy in Eastern Asia. Over the past year, the region experienced significant growth, with an 85.6% increase in its crypto market. Interestingly, much of this activity has been driven by institutional investors, who turn to decentralized exchanges and applications to maximize investment opportunities.