The Hong Kong Monetary Authority said it is discussing the technical pilot testing of the digital yuan, or e-CNY, for cross-border payments with the Digital Currency Institute of the People’s Bank of China, the central bank.
Eddie Yue Wai-man, chief executive of the HKMA, said the monetary authority and the PBOC have been making corresponding technical preparations, but there is not yet a timetable for the launch.
As the largest offshore yuan center, Hong Kong has a pool of more than 670 billion yuan ($99.8 billion) although most of it is illiquid.
Renminbi is already in use in Hong Kong, and the status of e-CNY is the same as cash in circulation, said Yue. The digital currency will be an additional payment option for those who need to make cross-border purchases.
Carlos Casanova, senior economist for Asia at Union Bancaire Privee based in Hong Kong, said that digital renminbi used in cross-border payments can promote the internationalization of the yuan, and promote the country’s trading strengths.
The digital renminbi can improve the convenience of cross-border payments and reduce reliance on the US dollar and SWIFT, Casanova said.
At a forum last month, Hong Kong’s Financial Secretary Paul Chan Mo-po said if digital renminbi can be used for cross-border payments, it will further promote the interconnection between Hong Kong and the Chinese mainland, especially with the rest of the Guangdong-Hong Kong-Macao Greater Bay Area.
Chan said the Hong Kong Special Administrative Region government and the HKMA are ready to actively explore various feasible plans with the PBOC to improve and expand the two-way circulation of cross-border renminbi.
Hong Kong has developed a highly efficient, diversified and inclusive payment ecosystem, Yue said. Studies and surveys conducted by the industry and international organizations suggest that the share of e-payment in Hong Kong is one of the highest among the world’s developed economies, he said.
Although domestic payment services around the world have become highly digitalized, development of cross-border payment systems is lagging, with transactions conducted via different banks or platforms running into common issues such as long processing times, high costs and low transparency, Yue said.
As an international financial center, Hong Kong attaches great importance to the provision of highly efficient cross-border payment services, he said, noting that the HKMA is dedicated to conducting research on the application of the latest fintech solutions for cross-border payment.
The HKMA will also consider leveraging Hong Kong’s Faster Payment System’s advantages of 24/7 operations and instantaneous payment to enhance cross-border bank remittance services, so that corporate and personal account holders in Hong Kong can receive overseas remittances or remit money to destinations abroad more speedily, Yue said.
From a long-term perspective, he said he believes there is a good chance of building a regional cross-border payment platform by riding the global trend of strengthening cooperation in cross-border payments.