Policy Stance on the "e-HKD"
The Hong Kong Monetary Authority (HKMA) has conducted two rounds of market consultations regarding the issuance of a "digital Hong Kong dollar" (e-HKD). These consultations focused on:
- High-level technical design of the e-HKD
- Major policy and design considerations
In September 2022, the HKMA published a document outlining preliminary views on how Hong Kong could better develop its future digital currency and payment ecosystem.
Technical Perspective
The HKMA released a technical white paper in October 2021 titled "e-HKD: A Technical Perspective", which explored potential technical design solutions for issuing and distributing retail CBDC. This paper proposed:
- The first central bank-proposed technical architecture with breakthrough privacy protection arrangements
- Capability to track transactions while safeguarding privacy
👉 Read the full technical white paper on e-HKD
Policy and Design Perspective
In April 2022, the HKMA published "e-HKD: A Policy and Design Perspective", discussing:
- Potential benefits and challenges of e-HKD
- Various design models (including issuance mechanisms and legal considerations)
- Potential use cases for digital currency
Three-Track Approach
Following the consultations, the HKMA adopted a three-track approach in September 2022 for potential e-HKD implementation:
| Track | Focus Area | Current Status |
|---|---|---|
| Track 1 | Establishing technical and legal foundations | Ongoing |
| Track 2 | Use case research and design execution | Pilot programs active |
| Track 3 | Comprehensive deployment planning | Timeline pending Track 1/2 results |
The HKMA has not yet made a final decision on whether or when to officially launch the e-HKD.
e-HKD Pilot Program Phase 1
Launched in November 2022, the pilot program represents a crucial component of Track 2. Key developments include:
- Creation of an e-HKD sandbox to accelerate prototype development
Six focus areas studied in Phase 1 (May 2023):
- Full-fledged payments
- Programmable payments
- Offline payments
- Tokenized deposits
- Web3 transaction settlement
- Tokenized asset settlement
Sixteen financial, payment, and tech institutions participated in Phase 1. The October 2023 Phase 1 Report identified three potential unique values e-HKD could bring to the payment ecosystem:
- Programmability
- Tokenization
- Instant settlement
👉 Explore Phase 1 findings in detail
e-HKD Pilot Program Phase 2
Launched in March 2024, Phase 2 focuses on:
- Assessing commercial viability in real-world scenarios
- Evaluating additional value from e-HKD and private digital currencies
- Understanding practical challenges in digital currency ecosystem design
Eleven industry groups are exploring three main themes:
Key Themes and Participants
| Theme | Participating Institutions | Use Case Focus |
|---|---|---|
| Tokenized Asset Settlement | HSBC, Standard Chartered, Visa, others | Fund tokenization, cross-border payments, DvP settlement |
| Programmability | Bank of China (HK), DBS, Hang Seng Bank, others | Smart contracts, ESG reward platforms, trade finance |
| Offline Payments | Bank of Communications, China Mobile HK, ICBC Asia | SIM card storage, anonymous wallets, dual offline payments |
The Phase 2 program will run for approximately one year, with participants utilizing the e-HKD sandbox for accelerated development.
Industry Collaboration and Research
e-HKD Industry Forum
The HKMA established this forum to:
- Provide a collaborative platform for pilot participants
- Explore implementation at scale
- Form industry-led working groups (initially focusing on programmability)
Major Joint Projects
Aurum Project (2022):
- Created a prototype two-tier CBDC system
- Contributed foundational work for subsequent retail CBDC projects
- Made source code and technical manuals available to other central banks
Sela Project (2023):
- Joint research with Bank of Israel and BISIH Hong Kong Centre
- Tested retail CBDC architecture for payment competition and innovation
- Demonstrated viability of public-private partnerships in CBDC ecosystems
Frequently Asked Questions
What makes Hong Kong's CBDC approach unique?
Hong Kong's three-track approach allows for parallel development of technical infrastructure, use case exploration, and comprehensive planning. The focus on programmability and tokenization sets it apart from many other CBDC initiatives.
How does the e-HKD differ from existing digital payment methods?
The e-HKD would be central bank money in digital form, offering:
- Direct liability of the central bank
- Enhanced privacy features
- Potential for innovative programmable applications
- Interoperability with tokenized assets
When will the e-HKD launch?
The HKMA has not set a definitive timeline. The decision will depend on:
- Progress of technical and legal foundations
- Results from pilot programs
- Market developments both locally and internationally
Can businesses participate in e-HKD development?
Yes, through:
- Future pilot program phases
- The e-HKD Industry Forum
- Collaboration opportunities announced by HKMA
How does e-HKD address privacy concerns?
The technical design includes breakthrough privacy protection arrangements that allow transaction verification while safeguarding user privacy - an innovative approach among central bank digital currencies.