After initiating a pilot program for the digital Hong Kong Dollar (eHKD) earlier this year, the Hong Kong Monetary Authority (HKMA) is expected to release a report of the findings from the project.
A cross-industry alliance, led by key players including Hong Kong Telecom (06823), Zhongan Bank, and Boston Consulting Group (BCG), has completed a pilot test for ‘tokenized property collateral loans’ and is set to submit a pilot plan to the HKMA by the end of the current month.
Following Hong Kong Fintech Week, a white paper detailing their findings will be released. The alliance expressed confidence in the program’s ability to reduce transaction costs and expedite the lending process, with additional members such as VSFG and Paywith.glass participating in the initiative.
VSFG, or Venture Smart Financial Group, is a global financial services platform headquartered in Hong Kong.
It provides a range of financial services, including private asset management, virtual asset management, and financing advisory services.
Paywithglass is a payment platform that provides intelligent global financial infrastructure, built to empower billions of people to transact instantly, with currency fluidity.
It combines A.I., Blockchain, and other technologies to provide a modern, effective global replacement for the SWIFT MT-based correspondent banking system.
The innovative process involves users first opening an account within the ‘Simulated Digital Hong Kong Dollar’ e-wallet, provided by HKT Payment, a subsidiary of Hong Kong Telecom.
Subsequently, users can apply to tokenize their assets, including property, through the VSFG interface within the app.
Once property tokens are obtained, users can utilize a portion of these tokens to apply for collateral loans at Zhongan Bank. The disbursement and repayment of funds occurs seamlessly through HKT’s e-wallet.
However, it’s important to note that the loans currently disbursed are earmarked for specific purposes, such as education and medical expenses, to enhance credit risk management.
Eddie Yue Wai-man, CEO of the Hong Kong Monetary Authority, spoke about the potential uses of e-HKD, highlighting scenarios like programmable payments and tokenized deposits and assets.
These trials have demonstrated the potential of e-HKD in payment, deposit, and investment contexts.
However, Yue emphasized that further experience and refinement are needed before determining a launch timeline for this digital currency.
In a programmable payment scenario, rules encoded in the digital currency govern its use, offering enhanced security for consumers.
For instance, it can safeguard a consumer’s money on deposit with a merchant in case of the merchant’s insolvency.
Several financial institutions and companies in Hong Kong, including the Bank of China (Hong Kong) and HSBC, have already engaged in trial programs to explore these features.
The e-HKD represents the retail aspect of Hong Kong’s central bank digital currency (CBDC) initiatives. In addition to these trials, the HKMA is collaborating with the People’s Bank of China (PBOC), the central banks of Thailand, and the United Arab Emirates in a multi-CBDC project called “mBridge” to study its use for settling international payments.
This initiative has garnered global attention, including from the Saudi Central Bank (SAMA). The four central banks involved in the trial are actively working on important policy issues, including governance and liquidity provisions, with plans to launch a minimum viable product in the middle of the next year.
Additionally, other central banks worldwide are closely monitoring these developments.