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Saturday, Feb 27, 2021
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Hong Kong progresses cross border digital yuan work

Hong Kong progresses cross border digital yuan work

On Friday, Eddie Yue, the CEO of the Hong Kong Monetary Authority (HKMA), said it’s discussing a technical pilot of the e-CNY or digital yuan with the People’s Bank of China (PBOC).
Here’s what Yue had to say re the Chinese central bank digital currency (CBDC) trials:

“The HKMA and the Digital Currency Institute of People’s Bank of China are discussing the technical pilot testing of using e-CNY, the digital renminbi issued by the PBOC, for making cross-border payments, and are making the corresponding technical preparations.

As the renminbi is already in use in Hong Kong and the status of e-CNY is the same as cash in circulation, it will bring even greater convenience to Hong Kong and Mainland tourists. While there is not yet a timetable for the launch of e-CNY, it will certainly offer an additional payment option to those in Hong Kong and the Mainland who need to make cross-border consumption.”

The two central banks are already collaborating on blockchain projects. A year ago, they signed an agreement to enable the PBOC’s trade finance blockchain to interoperate with Hong Kong’s eTradeConnect. The PBOC solution was developed by its Digital Currency Research Institute and was formerly referred to as the Bay Area Trade Finance Blockchain.

But it has since expanded to the Mainland and has more than 48 participant banks. By the end of August, it had processed more than RMB 191 billion ($29 billion) in trade finance. And the PBOC is keen to expand its linkage to Europe.

We have previously noted that the average values of transactions in e-CNY trials have increased, which could mean greater use for trade. However, the PBOC’s digital renminbi is intended to be only a cash alternative – referenced here by Yue – and one doesn’t usually pay for significant trade transactions with cash.

On Friday, the HKMA’s Yue also referenced the HKMA’s central bank digital currency work (CBDC) with the Bank of Thailand (BoT). After publishing a joint report with the BoT earlier this year, both central banks are now working with ConsenSys on further experiments.
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