The Hong Kong Monetary Authority (HKMA) is entering the second phase of its e-HKD (e-Hong Kong dollar) pilot program, testing use cases for a potential central bank digital currency (CBDC).
In a new report from the HKMA, the central bank says that in the first phase of the effort, 16 different companies explored different areas of CBDC use.
“Phase one delved deeply into potential residential and retail use cases across six categories: full-fledged payments, programmable payments, offline payments, tokenized deposits, web3 transaction settlement, and tokenized asset settlement. Sixteen companies from the financial, payments and technology sectors were selected to participate.”
One phase one participant, payments giant Mastercard, explored “packaging” e-HKD for use in other blockchains by “simulating the purchase of physical items and the contingent exchange of NFTs (non-fungible tokens) – each of which contains a digital certificate of representing authenticity for the physical item – on a tokenized asset network.”
The report notes several concerns regarding CBDCs, including privacy concerns raised by respondents in the lead-up to the phase one launch in November 2022.
“Respondents were generally receptive to an e-HMO, although they emphasized the need to explore the commercial viability of use cases and other issues such as privacy protection and legal considerations.”
The report also notes safety concerns regarding programmable retail CBDCs (rCBDCs), which consumers would use.
Says the report,
“An rCBDC issued as programmable currency may be more susceptible to cybersecurity risks because it may provide more mediums for external threats to inject malicious code. A delicate balance will therefore have to be struck between facilitating the development of innovative products and services by industry and ensuring the overall security of monetary and financial systems.”
The second phase of the pilot will “build on the success of phase one, and consider exploring new use cases for an e-HMO” and “dive deeper into selected pilots from phase one.”
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