Hong Kong has launched a pilot program for the digital yuan, the central bank’s digital currency

Hong Kong has launched a pilot program for the digital yuan, the central bank digital currency (CBDC) of the People’s Bank of China (PBoC).

The Hong Kong Monetary Authority’s (HKMA) launch of the digital yuan, or e-CNY beta, marks the first deployment of a CBDC outside of mainland China.

This pilot will enable Hong Kong residents to facilitate transactions from their e-CNY wallets, which can be credited through 17 retail banks using the Faster Payment System (FPS) – marking the system’s first integration with a CBDC by a major central bank, according to an announcement. May 17 by the Capital Markets Authority.

The interoperability infrastructure between FPS and e-CNY is being facilitated by the Digital Currency Institute (DCI), with the aim of promoting cross-border payments, which is among the main goals in the roadmap of the G20 countries.

Read Cointelegraph’s Cryptocurrency Guide to find out why central banks want to get into cryptocurrencies and CBDCs.

Similar to blockchain protocols, the e-CNY experience can facilitate payments 24/7. According to Eddie Yu, CEO of the Hong Kong Stock Exchange, the e-CNY app and wallet will gradually gain more functionality as the Hong Kong Authority and the People’s Bank of China work to facilitate further adoption by retail merchants. Yu wrote in the ad:

“By expanding the e-CNY experience in Hong Kong and taking advantage of the 24/7 operating hours and real-time transfer features of FPS, users can now top up their e-CNY wallets anytime, anywhere without having to Opening a mainland bank account, thus facilitating mainland business payments by Hong Kong residents.

As of now, Hong Kong residents only need their mobile phone number to set up an e-CNY wallet, which can currently facilitate cross-border payments but cannot be used for person-to-person transactions.

However, the Hong Kong Monetary Authority and DCI will continue to upgrade Chinese yuan e-wallets to “higher levels” through real-name verification, while corporate use cases for cross-border trade settlements will also be facilitated in the future.

While central bank digital currencies promise greater financial inclusion, some people worry about their potentially intrusive nature.

In July 2023, the Brazilian Central Bank published the source code for its CBDC pilot, and it only took four days for people to notice the monitoring and control mechanisms built into its code – allowing the central bank to freeze or reduce users’ funds inside CBDC wallets.

There are at least 140 countries around the world working on CBDC projects, and China’s digital yuan is considered one of the most advanced.

Related: Animoca Brands leads a $7 million funding round for Param Labs

Can the e-RMB pilot facilitate greater use of the RMB in Hong Kong?

China’s central bank aims to facilitate greater use of its official currency, the renminbi, which is accepted throughout Hong Kong, especially in tourist areas. However, the RMB cannot be used to pay for public transportation in Hong Kong, as exchanges usually offer a poor exchange rate against Hong Kong dollars.

Central Bank Digital Currencies: An Existential Threat to Cryptocurrencies? Source: Cointelegraph

The introduction of a pilot digital yuan program is likely to boost the use of the yuan in Hong Kong, with the People’s Bank of China (PBoC) also saying it aims to promote greater merchant acceptance of the central bank digital currency (CBDC).

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