The Hong Kong Monetary Authority (HKMA) recently announced its intentions to start laying the groundwork for a retail central bank digital currency (CBDC), following the release of a report on Friday (June 9). The HKMA has reportedly been researching the development of a digital Hong Kong dollar, known as the ‘e-HKD’, since 2017. This move follows a global trend, as central banks worldwide are increasingly exploring design options and potential use cases for digital versions of their respective sovereign currencies.
According to the report, a recent study and feedback from two rounds of market consultation have convinced the authority to initiate preparations for the potential future implementation of a retail digital currency. Moreover, the Bank of International Settlements has emphasized the importance of investigating the digitization of financial systems to preserve stability in the dynamic landscape. In light of such developments, the HKMA will reportedly conduct studies, establish the necessary foundations, and initiate pilot programs to explore the implementation and practical applications of a retail CBDC.
While the e-HKD might not play an imminent role in the current retail payment market, the HKMA’s report acknowledged that prospective use cases for e-HKD could emerge quickly, given the rapid evolution—or even revolution—of the digital economy.
Although the exploration of blockchain solutions for the e-HKD was proposed in the HKMA’s study, the regulator mentioned in its Friday’s report that it will consider various factors, such as policy objectives and steps taken by other jurisdictions, before moving forward with any technical solutions. This cautious approach suggests that the HKMA is committed to exploring the feasibility of a retail CBDC without overlooking potential risks and challenges associated with its implementation.
One possible concern surrounding the implementation of a retail CBDC is the potential for a negative impact on the existing payment market. Critics argue that introducing a digital version of a sovereign currency could disrupt the equilibrium between traditional payment methods and digital currencies. Additionally, there are questions about the security of CBDCs and whether they would be susceptible to cyberattacks.
In conclusion, the HKMA’s move to establish the groundwork for a retail CBDC is in line with the growing global trend of central banks exploring CBDCs. While the e-HKD may not yet have a significant role in the current retail payment market, the HKMA’s commitment to continuing research and pilot programs demonstrates its determination to explore the potential benefits of CBDC implementation patiently and cautiously.
Source: Coingape
