Hong Kong to put mainland's e-yuan on trial

Hong Kong will test connecting Chinese mainland's digital yuan with its local payments network, officials of the special administrative region said on Tuesday, the second stage of trials of China's digital currency in the financial hub.

China's e-CNY is one of the most advanced central bank digital currency projects among major economies. Mainland officials say the project will be initially domestically focused, but cross-border trials are also underway.

Countries around the world are looking at developing CBDCs to modernize their financial systems, ward off the threat from cryptocurrencies and speed up domestic and international payments.

The trial will explore how Hong Kong residents can top up an e-CNY digital wallet using the city's faster payment system, currently used to make domestic payments via mobile phones. "This will help Hong Kong residents to use e-CNY when they cross the border," said Nelson Chow, chief fintech officer of the Hong Kong Monetary Authority.

An earlier small-scale trial explored using e-CNY digital wallets in Hong Kong.

The HKMA also said it would issue a paper exploring the feasibility of issuing a retail-focused CBDC, an e-HKD, within 12 months. The paper will consider potential use cases, as well as data privacy, and anti-money laundering standards among others.