This March 15, 2024 photo shows some Hong Kong dollar banknotes in Hong Kong. (SHAMIM ASHRAF / CHINA DAILY)

HONG KONG – The Hong Kong Monetary Authority on Thursday launched the second phase of its e-HKD pilot program to further explore the innovative use of an electronic currency in the city.

The phase 2 of the pilot program will delve deeper into select pilots from phase 1 where an e-HKD could add unique value, namely programmability, tokenization, and atomic settlement, and explore new use cases that have not been covered in the previous phase, the HKMA, the city's de facto central bank, said in a statement. 

The first phase pilot program – which ran from May to October last year – studied domestic retail use cases in various areas such as programmable payments, settlement of tokenized assets, and offline payments. 

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Sixteen firms were selected from the financial, payment and technology sectors to participate in the first round, which involved 14 pilot projects covering six categories of potential e-HKD use cases.

Research on the e-HKD will continue to underpin the HKMA's broader work in exploring the roles central bank digital currencies could play in a future digital money landscape.

Hong Kong Monetary Authority

Organizations interested in participating in phase 2 of the e-HKD pilot program have been advised to submit their applications on or before May 17. 

An enhanced e-HKD sandbox – leveraged on the wholesale central bank digital currency (wCBDC) sandbox to be built under Project Ensemble – will support the second phase 2 of the e-HKD pilot program, said the HKMA.

It will focus on accelerating the prototyping, development, and testing of use cases by pilot participants, and facilitating the study of interoperability and interbank settlement between e-HKD and other forms of tokenized money, it added.

“Research on the e-HKD will continue to underpin the HKMA's broader work in exploring the roles central bank digital currencies (CBDCs) could play in a future digital money landscape,” reads the statement. 

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The HKMA has been conducting a number of in-depth research projects with the CBDC Expert Group on topics including programmability, privacy and interoperability, the HKMA said, adding that the insights gained from the two phases of the e-HKD pilot program and researches by the CBDC Expert Group will facilitate the HKMA's study on the possible implementation of an e-HKD. 

In June 2021, the HKMA announced it would study the prospect of issuing e-HKD in the city as part of the “Fintech 2025” strategy. After two rounds of public consultation, HKMA released the position paper in September 2022, stating that the issue of e-HKD implementation will be based on three stages.