Hong Kong Monetary Authority Launches Digital Yuan Pilot Program

The Hong Kong Monetary Authority (HKMA) announced the launch of a digital yuan pilot program on Friday. The digital yuan, or e-CNY, is designed to facilitate retail transactions and cross-border payments within the city, offering Hong Kong residents a digital alternative to cash payments while integrating China’s central bank digital currency (CBDC) into the local financial system.

Residents participating in the pilot can create digital yuan wallets linked to their mobile numbers and fund them through 17 local banks using the Faster Payment System (FPS). This collaboration between the FPS and the Digital Currency Institute of the People’s Bank of China marks the first connection between any CBDC and a rapid payment system.

As merchant adoption grows, the e-CNY wallets are expected to gain more functionalities, enabling wallet top-ups without the need for a mainland bank account. The program sets transaction and balance limits to ensure financial stability. Individual transactions and daily spending are capped at 2,000 yuan and 5,000 yuan, respectively, with a maximum wallet balance of 10,000 yuan. These controls are intended to manage usage and maintain economic equilibrium.

Since its introduction, the digital yuan has facilitated 1.8 trillion yuan (US$250 million) in transactions as of June 2023. Over 10 million merchants across 17 provinces and cities in mainland China now accept the digital currency.

The HKMA’s future plans include enhancing e-CNY wallets with real-name verification and exploring corporate applications for cross-border trade settlements, aiming to further integrate the digital yuan into Hong Kong’s financial landscape.