Hong Kong’s Cross-Border CBDC Trial to Start by Year-End

Hong Kong Monetary Authority (HKMA) plans to launch a trial of cross-border payments with its digital currency (CBDC) by the end of this year. The test will involve Hong Kong Exchange (HKEx), Stock Exchange of Thailand (SET), and 30 commercial banks.

Banks and exchanges in Hong Kong, mainland China, Thailand, and the United Arab Emirates will participate in the CBDC trial.

HKMA launched the CBDC initiative in 2019 by working with the Bank of Thailand to build a prototype of the platform. The HKMA will also continue to collaborate with China’s central bank, the People’s Bank of China in the testing of digital Renminbi, or DCEP, in Hong Kong.

“You should see cross-border payments that can be done real-time across four jurisdictions 24/7, with the FX (foreign exchange) leg settled real-time on a PvP (“payment versus payment”) basis,” said HKMA CEO Eddie Yue. He expects to commercialize the CBDC after this phase to enable wider scale implementation around the region.

Last month, HKMA said it is studying the launch of a digital Hong Kong dollar, called e-HKD, for everyday usage of local citizens and businesses. Regarding Hong Kong’s retail CBDC initiative, also called Project Aurum, Yue said they are exploring the possibility of having a 2-tier structure, with banks and payment intermediaries doing the end-user interfacing.

HK-Based Crypto Firms Shelter in Singapore

On the other hand, Hong Kong-based crypto companies are moving to Singapore, for the city-state’s friendly regulatory environment. Financial Times reported that as Singapore made it easier for foreign crypto groups to set up and serve residents, global crypto companies are expanding their presence in Singapore.

In contrast, Hong Kong is set to limit crypto trading to accredited or institutional investors under a new law.

According to Financial Times, Vitalik Buterin, the founder of cryptocurrency Ether, is based in Singapore. Changpeng Zhao, founder of Binance, the world’s largest crypto exchange, is moving to the city-state. Gemini, founded by Cameron and Tyler Winklevoss, has chosen Singapore as its Asian headquarters.

Singapore has granted exemptions to crypto exchanges, such as Hong Kong-based exchange OSL, allowing them to serve local retail and institutional investors.

Additionally, Singapore’s sovereign wealth fund GIC and state-backed investment company Temasek have been active in investing in crypto startups and businesses.