The Hong Kong Monetary Authority (HKMA) has published a technical whitepaper on retail central bank digital currency (CBDC) on Monday, thus strengthening its position to launch a digital fiat.
Titled ‘e-HKD: A technical perspective’, the whitepaper explores the idea and feasibility of launching a digital Hong Kong dollar (e-HKD) for its domestic and cross-border markets.
The whitepaper came after the de facto central bank confirmed in mid-2021 that it is planning to study a CBDC for local and retail usage. However, the HKMA was a part of researching wholesale usage of CBDCs with a consortium of other international counterparts since 2017.
“The Whitepaper marks the first step of our technical exploration for the e-HKD,” said Eddie Yue, Chief Executive of the HKMA. “The knowledge gained from this research, together with the experience we acquired from other CBDC projects, would help inform further consideration and deliberation on the technical design of the e-HKD.”
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A Collaborative Effort
The monetary regulator is jointly working on the building model of the CBDC with the Hong Kong Centre of the BIS Innovation Hub. According to the HKMA, it is one of the first CBDC whitepapers to unveil a technical architecture of a potential digital fiat.
Hong Kong is an autonomous Chinese territory and is following a ‘One Country, Two Systems framework. The central banks of Hong Kong and China earlier initiated talks to test the digital yuan in the autonomous territory, but further developments on that were not revealed.
“The architecture proposed in this whitepaper is most notable for its ability to flexibly and efficiently instantiate different two-tier distribution models of rCBDC while achieving breakthroughs in privacy-preserving transaction traceability and cross-ledger synchronization of decoupled ledgers,” the latest e-HKD whitepaper stated.