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Hong Kong Lists CBDC Development as Strategy Fintech 2025 Roadmap

The Hong Kong Monetary Authority (HKMA) has outlined its new technological development roadmap dubbed the ‘Fintech 2025’. It aims to develop Fintech and digital currency, Hong Kong’s version of Central Bank digital currency (e-HKD).

Per the published report, the apex monetary authority seeks to drive the financial sector to adopt technology in its entirety by 2025 ultimately. The areas it looks to overhaul, Central Bank Digital Currency (CBDC) pursuit or e-HKD, are vital aspects. Other strategic sectors include planning for all banks to go Fintech, creating a futuristic data infrastructure, growing the tech-savvy workforce and the rollout of funding, and the right policies to aid growth.

Hong Kong is one of the Asian cities that have already researching to develop a government-backed digital currency. Per the Fintech strategy, the HKMA said it would “strengthen its research work to increase Hong Kong’s readiness in issuing CBDCs at both wholesale and retail levels.”

The development of the Digital Hong Kong Dollar has been progressing with collaborations from the Bank for International Settlements (BIS) and the People’s Bank of China (PBoC). The apex bank also has a functional pact with the Bank of Thailand per the CBDC development. These collaborations, the HKMA says it will continue to cooperate.

“In addition to the continued effort on wholesale CBDCs, the HKMA has been working with the Bank for International Settlements (BIS) Innovation Hub Hong Kong Centre to research retail CBDCs and will begin a study on e-HKD to understand its use cases, benefits, and related risks,” the HKMA said in the statement, adding “The HKMA will also continue to collaborate with the People’s Bank of China in supporting the technical testing of e-CNY in Hong Kong to provide a convenient means of cross-boundary payments for both domestic and mainland residents.”

Many countries are making advances in positioning their fiat currency in readiness to absorb CBDCs. The United States of America, China, Sweden, and the United Kingdom are the latest names with active digital fiat currency developments. At the same time, these countries take a multi-year route to debut their cryptocurrencies competitors. Meanwhile, El Salvador has become the first country to adopt Bitcoin (BTC) as its official legal tender.

HKMA Releases Whitepaper on Proposing the issue of CBDC: e-HKD

The Hong Kong Monetary Authority (HKMA) has published a Technical Whitepaper to discuss the possibility of the digital Hong Kong Dollars (e-HKD) issue as part of its efforts to come up with an initial view regarding the prospects of its proposed Central Bank Digital Currency (CBDC) by the middle of next year.

The Whitepaper is part of the central bank institution’s projected “Fintech 2025” strategy, highlighting one strategic direction to strengthen research work on CBDC with a view to future-proofing Hong Kong in terms of CBDC readiness.

According to the HKMA, the Whitepaper explores potential technical design options for issuing and distributing retail CBDCs. The apex bank noted that the Whitepaper will be the first of a slew of other papers that are on track to be released to showcase a “technical architecture that includes a groundbreaking privacy preservation arrangement that allows transaction traceability in a privacy-amicable manner.”

Eddie Yue, Chief Executive of the HKMA, said:

“The Whitepaper marks the first step of our technical exploration for the e-HKD. The knowledge gained from this research, together with the experience we acquired from other CBDC projects, would help inform further consideration and deliberation on the technical design of the e-HKD. We also look forward to receiving feedback and suggestions from academia and industry to enrich our perspectives,”

No timelines were defined yet as to when the e-HKD will be launched, as the HKMA noted that further legal and policy frameworks will have to be designed to back any affirmative decision to launch the CBDC.

The race to launch a CBDC has become one of the primary targets for a number of Central Banks around the world nowadays. While the People’s Bank of China (PBoC) is pioneering the retail trials of its Digital Renminbi (e-CNY) amongst the largest economies, American lawmakers are notably demanding a timeline on the Federal Reserve’s planned release of its consultative paper on a potential Digital Dollar.

With the CBDC race intensifying, the PBoC’s assertions that digital fiat currency becoming a “new battlefield” amongst sovereign countries coming to fruition is now more likely than ever.

Ripple's CBDC Team Reveals Real Estate Tokenization

Antony Welfare, Ripple’s CBDC adviser, recently participated in a fintech conference in Central and Eastern Europe (CEE), where he presented two groundbreaking use cases. One of these is the tokenization of real estate, a concept that is rapidly gaining momentum as a potential future for the real estate industry, as he claimed

The e-HKD, a hypothetical digital currency, and tokenized real estate are three distinct protocols that Ripple is currently experimenting out. This innovative method enables users to tokenize real estate assets and utilize them as loan collateral, which has the potential to increase access to real estate financing for more individuals.

This will be made feasible by using the secure, private, and permissioned ledger known as the Ripple CBDC Platform. This platform was developed to make it simpler to manage tokenized assets and digital currencies securely, effectively, and decentralizedly.

With the Non-Fungible Tokens (NFTs), Ripple has already established a presence in the real estate sector prior to this development. In order to use the XRP Ledger for the purpose of creating and dispersing NFTs indicating property ownership, ProprHome engaged into a cooperation with Ripple in November 2022. This would simplify the house buying, selling, and renting processes.

Blockchain technology has already been employed in real-world real estate transactions in certain cases. Leslie Alessandra utilized a blockchain and a non-fungible token (NFT) to finalize the sale of her house in Gulfport, Florida, in February 2022, making her the first individual in the United States to sell a property in this manner.

The Central Bank of Russia (CBR) looked at the use of CBDCs for the settlement of real estate transaction transactions in June 2022.

On the other side, tokenizing real estate is not without its share of challenges. Hong Kong Securities and Futures Commission (SFC) has listed many suspected unauthorised projects related to real estate tokenization.

Hong Kong HKMA Advances CBDC Development with Phase 2 of e-HKD Pilot

The Hong Kong Monetary Authority (HKMA) has announced the commencement of Phase 2 of the e-HKD Pilot Programme, marking a significant step forward in the exploration and potential adoption of Central Bank Digital Currency (CBDC) in Hong Kong. This development comes as part of a broader global effort to understand and integrate digital currencies within financial systems, and signifies Hong Kong’s commitment to fostering innovation in its monetary landscape.

In October 2023, the HKMA concluded Phase 1 of the pilot program, which was primarily focused on domestic retail applications, including programmable payments, settlement of tokenized assets, and offline payments. With the successful completion of Phase 1, the HKMA is now looking to delve deeper into specific areas where the e-HKD can provide unique value. These areas include the enhancement of programmability, the tokenization of assets, and atomic settlements – processes that are expected to revolutionize the efficiency and security of financial transactions.

An enhanced e-HKD sandbox environment is set to play a crucial role in Phase 2. This sandbox, leveraging the infrastructure to be established under Project Ensemble, will facilitate the accelerated prototyping, development, and testing of various use cases by participants. Furthermore, it will aid in the study of interoperability and facilitate interbank settlements between e-HKD and other tokenized forms of money.

The ongoing research on e-HKD will continue to support the HKMA’s comprehensive efforts in understanding the role CBDCs could play in the future of digital money. A CBDC Expert Group has been engaged in in-depth studies covering critical aspects such as programmability, privacy, and interoperability.

Insights and outcomes from both the initial phase and the ongoing second phase of the e-HKD Pilot Programme, along with research conducted by the CBDC Expert Group, are expected to be instrumental in guiding the HKMA’s strategy regarding the potential implementation of e-HKD.

The HKMA is maintaining active engagement with both local and international stakeholders to stay abreast of CBDC developments worldwide. This collaborative approach ensures that the authority remains at the forefront of digital currency innovation and integration.

Organizations interested in participating in Phase 2 of the e-HKD Pilot Programme have been invited to submit their applications by 17 May 2024. The HKMA has provided detailed information about the application process on its website, encouraging interested parties to contribute to this groundbreaking initiative.

The launch of Phase 2 of the e-HKD Pilot Programme is a testament to Hong Kong’s proactive stance on digital currency and its potential benefits. As CBDCs continue to gain momentum globally, the HKMA’s efforts position Hong Kong as a leader in the digital currency evolution, potentially setting a benchmark for other nations to follow.