Hong Kong Publishes FinTech Strategy, pursues CBDCs

The Hong Kong Monetary Authority recently published its “Fintech 2025” strategy, a comprehensive plan for its adoption of digital finance by 2025.The innovation plan includes a section on central bank digital currencies (CBDCs), with the Hong Kong Monetary Authority (HKMA) disclosing that efforts and initiatives on CBDC research will be boosted in order to ensure Hong Kong’s readiness to implement and offer both retail and wholesale CBDCs.“Fintech is, without doubt, a key growth engine for the financial industry in the post-pandemic era, and now is the right time to double down on our efforts to grasp the opportunities. [Fintech 2025] sets out our vision in this regard. I urge all stakeholders to join forces with the HKMA. Together, we can take our city’s fintech ecosystem to new heights.” stated Eddie Yue, Chief Executive at the Hong Kong Monetary Authority.According to the HKMA, their agency has been involved in a collaboration with the People’s Bank of China, and will continue to do so. A series of technical tests for a digital fiat based on the Chinese Yuan called e-CNY will be held in Hong Kong based on the collaboration.A collaboration with the Bank for International Settlement is also underway, according to the announcement, and is set to continue research on a retail digital Hong Kong Dollar (e-HKD) currency.“The HKMA will strengthen its research work to increase Hong Kong’s readiness in issuing CBDCs at both wholesale and retail levels. 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 agency stated in a press release.Despite this renewed support in the development of financial technologies, Hong Kong has itself stepped back on cryptocurrencies in general, with a policy proposal issued by its Financial Services and Treasury Bureau moving to restrict access to cryptocurrencies. The proposal calls for the Hong Kong government to restrict cryptocurrency trading for investors with portfolios worth at least $1 million, with tightened regulatory and compliance frameworks for all registered traders.Earlier in May, Hong Kong authorities announced that they have been exploring ways to host pilot studies for China’s central bank, with the project on digital currency electronic payment (DCEP) as a primary factor.The HKMA is also engaged in a regional collaboration with a consortium of Asian central banks working on technologies for bridging CBDCs. The bridge will be based on decentralized ledger technology, in order to process cross-border payments and transactions.

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