Hong Kong Monetary Authority publishes technical paper on retail CBDC

The Hong Kong Monetary Authority (HKMA) has published a white paper on a retail central bank digital currency (CBDC) titled “e-HKD: A Technical Perspective”.

According to the press release, the document forms part of research into the technical aspects of CBDC.

The regulator noted that in June 2021 it announced the Fintech 2025 strategy, one of the main directions of which is the study of digital currency with a view to its readiness for deployment.

In addition to collaborating with other central banks on cross-border use of CBDC, the HKMA has begun exploring the prospects for issuing a retail digital currency in Hong Kong (e-HKD). The HKMA’s partner is BIS.

In the white paper the regulator outlined potential technical architectures for issuing and distributing retail CBDCs and presented an architecture that includes “a novel mechanism for preserving transaction privacy.”

The HKMA envisions a two-tier system for such assets: a wholesale layer for issuing and redeeming CBDC by the central bank, and a retail layer for distribution by commercial institutions in the form of digital money.

The regulator also listed a number of questions for further study of the digital currency, inviting academics and industry practitioners to share views and comments.

“The white paper marks the first step in our technical research for the e-HKD. The knowledge gained from this work, together with the experience we have gained in other CBDC projects, will help underpin further consideration and discussion of the e-HKD,” said Eddie Yue, Chief Executive of the HKMA.

Earlier, BIS, in a joint study with a group of central banks, concluded that for CBDC effectiveness cooperation between the public and private sectors is required.

Drawing on results obtained during the mBridge project (formerly Inthanon-LionRock), specialists said that the use of digital currencies in cross-border payments could reduce transaction times to seconds and cut their costs by 50%.

E-HKD a Technical Perspective by ForkLog on Scribd