Hong Kong digital dollar yuan

Hong Kong Launches Digital Currency to Track Money Transfer?

Hong Kong digital dollar yuan
The Hong Kong Monetary Authority (HKMA) releases a technical whitepaper on Hong Kong’s digital currency. One feature is the HKMA can track users’ money transfers and transactions. And, it allows an easy exchange between the e-HKD and China’s digital yuan, or DCEP.

HKMA’s whitepaper studies the issuance of a central bank digital currency for daily mass retail use in Hong Kong. HKMA explores the technical design for Hong Kong’s digital currency, according to Eddie Yue, Chief Executive of the HKMA. After considering technical and policy factors, the HKMA will make a preliminary decision in the middle of next year. That involves whether Hong Kong will launch its digital dollar for the citizens.

Also, HKMA will continue to cooperate with the People’s Bank of China (PBoC) on the trial of China’s digital yuan in Hong Kong. It plans to allow Hong Kong and mainland residents to use digital yuan for cross-border payments and remittances. This includes efficient cross-border payments and exchanges between Hong Kong’s digital dollars and China’s digital yuan.

Interestingly, HKMA’s whitepaper reveals a comparison between Hong Kong’s digital dollar and Bitcoin (BTC), the largest cryptocurrency by market cap.

In the white paper, the HKMA mentioned Bitcoin 4 times, listed cryptocurrency publications such as the Bitcoin whitepaper ( ‘Bitcoin: A peer-to-peer electronic cash system’) in its bibliography. Moreover, it even mentions Bitcoin’s inventor Satoshi Nakamoto.

The HKMA pointed out that, compared to Bitcoin’s “Proof-of-Work” mechanism, the transaction verification process of digital Hong Kong dollars will be much faster and energy-efficient. Thereby, Hong Kong’s digital dollar is more suitable for a large user base and high transaction volumes.

HKMA on Bitcoin and Ethereum?

In addition, the HKMA twice mentioned Ethereum (ETH), the second largest blockchain network. During the study, HKMA has studied Ethereum, Corda, and Hyperledger Fabric, among other leading blockchains.

The HKMA will only allow the public to convert fiat Hong Kong dollars into digital Hong Kong dollars through commercial banks. Meanwhile, banks will exchange fiat Hong Kong dollars with the HKMA for digital Hong Kong dollars. This is the so-called “two-layer” mechanism — a wholesale system for the central bank to issue and redeem the digital dollar, and a retail system for commercial banks to distribute it.

China’s digital yuan makes use of smart contracts, cryptography and tracking to enhance anti-money laundering efforts and tax evasion. It could become a valuable instrument for the government on monetary policy control as well as money tracking.

Within this year, the digital yuan has been in its mass trials in major cities in mainland China. This includes multiple large-scale lotteries or universal cash subsidies, as well as payments in transportation fares.

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