The Hong Kong Monetary Authority (HKMA) will study the feasibility of a digital currency over the next 12 months.
The HKMA, the city's de facto central bank, will include users' privacy, security and anti-money-laundering concerns in the study, Eddie Yue Wai-man, the authority's chief executive (CEO), said on Tuesday. The announcement came during the launch of Fintech 2025, the HKMA's fintech plan for the next four years.
"Hong Kong people, nowadays, are more willing to use digital banking services. In addition, many overseas central banks have studied digital currencies. It is the right time for the HKMA to explore if we should have an e-Hong Kong dollar," Yue said. "The HKMA has set up a working group to study the technology and regulatory issues related to an e-Hong Kong dollar. We will have a conclusion in about 12 months."
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The e-Hong Kong dollar feasibility study comes as the HKMA plays catch up with other central banks globally that are considering digital currencies. But Fintech 2025 has other areas of focus, including the scrutiny of all Hong Kong banks' fintech plans for the next three years; the set up of data sharing and other infrastructure to help small and medium-sized companies get bank loans; and training and support for new fintech projects. The plan is the most comprehensive and strategic project announced by Yue since he took over the job in October 2019.
The new initiative is expected to pave the way for a new chapter in fintech development in Hong Kong. It is also expected to lead to greater integration with the Greater Bay Area development zone.
The digital currency, if launched, will not have any implications on the Hong Kong currency's US dollar peg, said Howard Lee, the HKMA's deputy CEO. "The e-Hong Kong dollar will just be an electronic version of a physical banknote. As such, the mechanism of the issuance of e-Hong Kong dollars will be the same as the issuance of physical banknotes under the peg," he said.
The HKMA might keep the current system, where three banks - HSBC, Standard Chartered and Bank of China (Hong Kong) - are allowed to issue banknotes, when it comes to issuing the digital currency, or it might issue e-Hong Kong dollars itself.
Lee said the digital currency was not related to the cross-border blockchain payments platform the HKMA has been working on with the central banks of China and Thailand since 2019. The e-Hong Kong dollar would be for use by Hongkongers in the domestic market.
The HKMA has been working with the People's Bank of China on the possibility of using the Chinese central bank's digital currency in Hong Kong. Photo: Reuters alt=The HKMA has been working with the People's Bank of China on the possibility of using the Chinese central bank's digital currency in Hong Kong. Photo: Reuters
The HKMA has also been working with the People's Bank of China on the possibility of using the Chinese central bank's digital currency in Hong Kong. The aim here is to make it easier for Hongkongers and mainland Chinese users to make cross-border payments.
"The demand for cross-border payments will increase with the soon-to-be launched southbound bond connect and the Wealth Management Connect scheme," Yue said.
Industry body Hong Kong Association of Banks said it welcomed Fintech 2025. The association "has made deliberate efforts to promote the application of fintech, and collaborated with member banks to facilitate the adoption of artificial intelligence and data analytics in banking operations, the use of regulatory technology in compliance, and the enhancement of cybersecurity", it said on Tuesday.
"Thanks to the sustained investments in technology, banks in Hong Kong have been able to operate and provide banking services as usual during the Covid-19 pandemic," the association said, adding that it looked forward to working with different stakeholders and supporting fintech development in Hong Kong.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.
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