On June 8, reports emerged that the Hong Kong Monetary Authority (HKMA) has unveiled its “Fintech 2025” strategy. Interestingly, retail and wholesale central bank digital currencies (CBDC) have been included in the digital finance innovation package.
This strategy means that research into CBDCs will play an integral role in Hong Kong’s fintech development efforts. It was unveiled through a release issued on Tuesday. Hong Kong seems to be ready to use CBDCs to promote comprehensive digital finance adoption by 2025.
The HKMA said that it would increase its studies and research to make sure that the jurisdiction is ready to float retail and wholesale CBDCs within the stipulated time. Based on this announcement, the HKMA confirmed that it is working with the Bank for International Settlement (BIS) to research a retail digital Hong Kong dollar currency.
This research will allegedly examine risks, benefits, and possible use cases of an effective e-HKD currency. The HKMA also said that it will continue to cooperate with China’s central bank on the issue of cross-border utilization of China’s digital currency electronic payment (DCEP) project. Reports emerged last month that Hong Kong was aiming to expand its pilot studies for the PBoC’s digital yuan.
In the meantime, the HKMA is also part of a consortium of the Asian central banks that are working on a multiple central bank digital currency bridge. This project works on a similar collaboration between Thailand and Hong Kong to set up cross-border CBDCs based on decentralized ledger technology (DLT).
The expanded CBDC research plan is among the five major focus points in Hong Kong’s fintech strategy. Other sectors include guaranteeing that the city’s banks embrace digital finance technology while also developing a robust data infrastructure to support the scheduled fintech expansion.
Hong Kong also seeks to support its robust fintech overhaul with government-led policies while simultaneously laying a strong groundwork to create a skilled workforce for the new and changing digital finance paradigm.
Amid this backdrop of its expanded fintech focus, Hong Kong is also believed to be moving to restrict access to cryptos. The city’s Financial Services and Treasury Bureau published a policy proposal in May 2021 urging the government to limit crypto trading to qualified investors with portfolios that are worth more than $1 million.