The Hong Kong Ministry of Finance plans to test the cross-border transaction capabilities of China’s central bank digital currency (CBDC).
More than 80 percent of the world’s central banks have stated that they deal with digital currencies. So does the People’s Bank of China (PBoC). This is now taking the lead in the research and development of the digital renminbi, the DC / EP. In April 2020 it was already announced that corresponding tests with the CBDC would be started in four cities.
On October 14, 2020, Hong Kong Finance Minister Christopher Hui announced in a press releaseannounced that the government is considering working with the authorities on China’s digital currency project, the digital yuan. Meanwhile, the government attaches great importance to the development of financial technologies. She is determined to use Hong Kong’s position as a global hub for China’s official currency, the renminbi. In consultation with the Hong Kong Monetary Authority, Hui said:
If the digital yuan can be applied to cross-border payments, it would further promote mutual connectivity between China and Hong Kong
HKMA’s priority is to develop a digital currency to make cross-border payments efficient. According to research results, the application of CBDC at the level of wholesale and cross-border payment transactions has greater potential; especially because Hong Kong already has an efficient payment infrastructure for private customers. In order to become active in this area, the central bank has launched a new project. „LionRock“ is intended to examine how Hong Kong can use the opportunities from the development of the DC / EP.
Digital yuan could simplify cross-border transactions
The interests of the government agency in Hong Kong in the digital currency of the PBoC are based on the fact that it could facilitate cross-border transactions. Hui stated:
If the digital currency developed by People’s Bank of China can be applied to cross-border payments, it would further promote mutual connectivity between the mainland (including Guangdong-Hong Kong).
The government and the HKMA still intend to maintain communications.
Is Europe falling behind?
While China’s central bank is already testing the DC / EP in some regions and areas of application , the central banks in this part of the world are still hesitant about CBDC. Most recently, Burkhard Balz, member of the board of directors of the Deutsche Bundesbank, assured that there should be no quick shot in the direction of the digital euro. First of all, it is necessary to clarify „under which conditions the introduction of a CBDC or a digital euro would be desirable for the public,“ said the central banker in a speech on October 20.