Hong Kong Expands Testing of China’s Digital Yuan

Hong Kong has entered the second phase of technical testing for China’s digital yuan, with the trial now including more Hong Kong banks. The initial tests for cross-border payments using the digital yuan have been completed the Hong Kong Monetary Authority (HKMA) and the People’s Bank of China. According to Christopher Hui, Secretary for Hong Kong’s Financial Services and the Treasury, the second phase of the technical trial is currently underway, expanding the involvement of more Hong Kong banks and testing the digital yuan wallet’s top-up function through the Faster Payment System (FPS).

The Faster Payment System (FPS) was introduced the HKMA in 2018 and enables cross-bank payments in Hong Kong dollars or Chinese yuan using the recipient’s mobile phone number or email address. In the second quarter of this year, the FPS processed approximately HK$1 billion worth of Hong Kong dollar payments, demonstrating its growing popularity.

The digital yuan, also known as the e-CNY, is expected to provide a secure, convenient, and innovative option for cross-border retail consumption for residents in both regions. It aims to enhance the efficiency of cross-border payment services and user experience, promoting connectivity in the Greater Bay Area of Guangdong, Hong Kong, and Macau.

China is currently leading the pack in terms of central bank digital currency (CBDC) development, with over 200 million people participating in trials of its CBDC across various provinces. Hong Kong’s expansion of digital yuan testing aligns with its ambition to become a global crypto hub. The region has introduced new legislation that allows retail investors to trade specific “large-cap tokens” on licensed exchanges, subject to safeguards such as knowledge tests, risk profiles, and reasonable exposure limits. The Securities and Futures Commission (SFC) has also been granting licenses to cryptocurrency exchanges in line with its new crypto licensing regime.

Overall, Hong Kong’s progression in digital yuan testing and its efforts to become a crypto hub reflect the region’s commitment to embracing financial innovation and positioning itself as a leader in the digital currency landscape.

Sources:
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