After the successful completion of an initial pilot program to test the use of the digital yuan across borders, the Hong Kong Monetary Authority (HKMA) is seeking to expand testing of the digital asset. Bloomberg reported that the initial tests were conducted between multiple parties, including merchants and a bank chosen by mainland Chinese authorities.
According to the HKMA, plans for the next phase of pilots are already underway: “We have tested the use of the related app, system connectivity and certain use cases such as cross-boundary purchases,” the Authority told Bloomberg.
“We are discussing and collaborating with the PBOC [People’s Bank of China] on the next phase of technical testing, including the feasibility of broadening and deepening the use of e-CNY for cross-boundary payments.”
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The Digital Yuan Grows Closer to Launch than Ever
While the cross-border tests with Hong Kong were conducted fairly recently, pilot programs of the digital currency have been underway in mainland China for several years.
Indeed, the People’s Bank of China began working on the country’s digital currency initiative all the way back in 2014. Throughout this and last year, a number of trials have been conducted in major cities across the country, including Shenzhen. Additional trials are planned for the Winter Olympics, which will be conducted in Beijing next year.
In a report published on April 12th, Oliver Wyman consultancy said that the implementation of the digital yuan could result in a much faster and less expensive cross-border transaction settlement infrastructure. The report said that currently, cross-border payments in Hong Kong cost between $20 billion to $40 billion per year, which is equivalent to nearly 11% of the city’s 2020 GDP.
Zhou Xiaochan, former Governor of the People’s Bank of China, previously said that the digital currency is not intended to replace other world currencies, like the dollar or euro: “If you are willing to use it, the yuan can be used for trade and investment. But, we are not like Libra, and we don’t have an ambition to replace existing currencies.”