- The digital currency, dubbed e-HKD, targets the general public.
- e-HKD aims to address the volatility in decentralized finance (DeFi).
According to a report published by the regulator on Friday, the Hong Kong Monetary Authority (HKMA) is laying the groundwork for implementing a retail central bank digital currency (CBDC).
Dubbed e-HKD, the statement said the step toward implementing the currency follows recent findings from two rounds of market consultations on the viability of the retail CBDC. Unlike wholesale CBDCs, a digital alternative to the fiat currencies issued by central banks, retail CBDCs (rCBDCs) targets the general public.
“While it appears that e-HKD might not have an imminent role to play in the current retail payment market, we believe prospective use cases for e-HKD can emerge quickly out of the rapid evolution, or even revolution, in the digital economy,” HKMA said.
The Next Steps in e-HKD’s Implementation
According to the market consultations conducted by the HKMA, the respondents proposed having rCBDC running in a permissionless blockchain, a different stance from that of the regulator said to explore a permissioned blockchain for the e-HKD with private banks handling implementation.
HKMA is also looking at the potential of the retail CBDC in addressing the volatility in the cryptocurrency space and providing stability to the emerging decentralized finance (DeFi) ecosystem. According to the announcement, part of the regulator’s steps in laying the foundation for Retail CBDC would be to conduct an in-depth study and pilots for the implementation and application of rCBDC.
The HKMA started exploring CBDC in 2017, focusing mainly on applying digital currency for institutional clients in Hong Kong. Afterwards, the regulator branched out to study rCBDC in 2021 following a rapid surge in cryptocurrency adoption.
