The Hong Kong Special Administrative Region (HKSAR) unveiled its new strategy for driving fintech development in Hong Kong on Tuesday, including further testing of digital currencies.
The strategy, named “Fintech 2025,” aims to encourage the financial sector to adopt technology comprehensively by 2025, as well as to promote the provision of fair and efficient financial services for the benefit of Hong Kong citizens and the economy, according to a press release from the Hong Kong Monetary Authority (HKMA) on its website.
“The HKMA will research retail Central Bank Digital Currencies (CBDCs) and will begin a study on an e-HKD to examine its benefits and any potential risks. The HKMA will also continue to collaborate with the People’s Bank of China (PBC) in supporting the technical testing of e-CNY in Hong Kong with a view to providing a convenient means of cross-border payments for both domestic and mainland residents,” said Eddie Yue, chief executive of the HKMA.
Analysts said that e-HKD, or digital HKD, and digital RMB are both CBDCs, so the testing scenarios for digital RMB could also be applicable for digital HKD.
“The collaboration between digital RMB and HKD should be cross-border. As currently the digital HKD has not been rolled out, it is not likely to promote the digital yuan on a large scale in Hong Kong,” Chen Bo, director of the Digital Finance Research Center at the Central University of Finance and Economics, told the Global Times on Tuesday.
To develop digital HKD, Chen said that apart from technical issues, acceptance by residents is also a big factor.
“The payment habits of Hong Kong residents are different from those of residents in the Chinese mainland. As the Hong Kong SAR and the Chinese mainland follow different financial laws, the design and promotion of digital currencies should also vary,” Chen said.
According to the PBC’s annual payment system report, in 2020, banks in the Chinese mainland handled a total of 354.73 billion in non-cash payment transactions, amounting to 4,013.01 trillion yuan ($627.3 trillion). Of these transactions, 235.23 billion were electronic payment transactions, worth a total of 2,711.81 trillion yuan.
The data showed that nearly 70 percent of the non-cash payments were made via electronic means last year, indicating that electronic payments have high recognition in the mainland.
The digital RMB can take a step forward in its internationalization if it can be connected with the digital HKD, Chen added.
Hong Kong’s 2025 strategy for fintech also includes the promotion of fintech among Hong Kong banks and encouragement of digitalization of their operations, creating next-generation data infrastructure and nurturing the ecosystem with funding and policies, according to the HKMA.