Hong Kong has entered the second phase of technical testing for China’s digital yuan, expanding the trial to include more Hong Kong banks.
The Hong Kong Monetary Authority (HKMA) and the People’s Bank of China have completed initial technical tests for cross-border payments using the digital yuan in Hong Kong, Christopher Hui, Secretary for Hong Kong’s Financial Services and the Treasury, reportedly said at a fintech event.
He added that the second phase of the technical trial is currently underway, involving more Hong Kong banks and testing the digital yuan wallet’s top-up function through the Faster Payment System (FPS).
“Currently, they are conducting the second phase of the technical trial, involving more Hong Kong banks and testing the digital yuan wallet’s top-up function through the Faster Payment System.”
The FPS, introduced by the HKMA in 2018, facilitates cross-bank payments in Hong Kong dollars or Chinese yuan by simply using the recipient’s mobile phone number or email address.
In the second quarter of this year, the FPS processed approximately HK$1 billion worth of Hong Kong dollar payments, up from HK$669.6 million in the same period last year, as per data from Hong Kong Interbank Clearing Limited.
Hui said that the digital yuan, also known as the e-CNY, is expected to provide a secure, convenient, and innovative option for cross-border retail consumption for residents in both regions.
He further noted that it would “enhance the efficiency of cross-border payment services and user experience, promoting connectivity in the Greater Bay Area of Guangdong, Hong Kong, and Macau.”
The expansion of digital yuan testing in Hong Kong comes as China is leading the pack in terms of CBDC development.
The country has launched numerous test pilots of its CBDC across various provinces, with over 200 million people already taking part in trials.
In total, 11 countries have fully launched a CBDC, which include China, The Bahamas, Nigeria, Anguilla, Jamaica, and seven Eastern Caribbean countries.
Hong Kong Strives to Become Global Crypto Hub
Hong Kong has set its sights on becoming a major crypto hub as the region actively promotes the development of Web3.
The city-state has unveiled a new rulebook for cryptocurrencies.
Under the new legislation, Hong Kong allows retail investors in the city to trade specific “large-cap tokens” on licensed exchanges, given that safeguards such as knowledge tests, risk profiles, and reasonable exposure limits are put in place.
Furthermore, the Securities and Futures Commission (SFC), the country’s main financial regulator, has been awarding licenses to exchanges in accordance with its new crypto licensing regime.
Just last week, the commission provided an approval-in-principle (AIP) license to Swiss-based SEBA Bank.
The license will allow SEBA Hong Kong to conduct a spectrum of regulated activities, including dealing in securities, encompassing virtual asset-related products like structured products and over-the-counter (OTC) derivatives.
More recently, it was reported that crypto exchange OKX has entered the final stage of obtaining a Virtual Asset Service Provider License (VASP) in Hong Kong.
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