Hong Kong starts second phase of e-HKD pilot to explore tokenization, offline payments

Hong Kong commenced the second phase of its central bank digital currency pilot on Monday, aiming to test the commercial feasibility of its e-HKD.

The Hong Kong Monetary Authority, the de facto central bank, said in a statement that the project has been renamed “Project e-HKD+” as it officially commenced the second phase of the e-HKD pilot.

“Under Phase 2, 11 groups of firms from various sectors have been selected to explore innovative use cases for e-HKD and tokenized deposits across three main themes, namely settlement of tokenized assets, programmability and offline payments,” the HKMA said.

The HKMA intends to conduct the second phase with an e-HKD sandbox to allow pilot participants to prototype and test use cases. According to a separate official document, Hang Seng Bank, Aptos Lab and Boston Consulting Group plan to test the commercial value of settling a tokenized fund with digital money on a public blockchain.

The document also showed that Visa, ANZ, Fidelity and ChinaAMC will explore settlement for interbank transfers and cross-border payments through e-HKD and tokenized deposits, aiming to facilitate Australia-based corporate investors’ purchases of tokenized fund units offered by asset management firms in Hong Kong.

Other participants include Bank of China, HSBC, ICBC, Standard Chartered Bank, DBS, BlackRock, Mastercard and China Mobile.

The HKMA aims to disclose the key findings from the second phase by the end of 2025. The first phase of the e-HKD pilot studied domestic retail use cases for programmable payments, settlement of tokenized assets, and offline payments.

“The e-HKD Pilot Programme has provided a valuable opportunity for the HKMA to explore with the industry how new forms of digital money can add unique value to the general public,” Eddie Yue, chief executive of the HKMA, said in the Monday statement. “The HKMA will continue to adopt a use-case driven approach in its exploration of digital money.”

According to its website, the HKMA started researching CBDCs in 2017 and began placing greater emphasis on studying a potential e-HKD in 2021 at both wholesale and retail levels.