After India and China, that have led the CBDC revolution in Asia, Hong Kong is accelerating its efforts to introduce a national digital currency in their existing financial system. The administration of Hong Kong is currently working on the roadmap to introduce the e-HKD CBDC to its estimated population of over 7.5 million in the coming months. While India and China have decided their CBDCs to be regulated by the central banks, Hong Kong has left that decision to be finalised for a later time.
In a new twist, Hong Kong has left it to the banks to discuss and decide if they wish to keep the e-HKD CBDC either centralised — under their control, or decentralised — where the CBDC would be distributed away from a central, authoritative location in small fractions.
“They (the banks) are allowed to go and review and research and then propose back,” a CoinDesk report quoted a source familiar with the situation as saying.
Unlike the UK and the US, that have taken a rather democratic approach and invited suggestions on CBDCs from their nationals, Hong Kong wishes to keep the process more in the hands of the authorities.
Regular citizens of Hong Kong are not likely to be part of any CBDC-related decision making. While India did hold several rounds of discussions with finance ministry officials and blockchain industry insiders, China is not known to have taken a similar approach.
The overall approach to Web3 in Hong Kong has been very progressive. The nationals there are welcoming Web3 technologies like cryptocurrencies, NFTs, and the metaverse with an experimentative approach.
Forex, in its latest ‘Worldwide Crypto Readiness Report’ suggested that Hong Kong is the most crypto-ready country in the world. In the index, Hong Kong bagged 8.6 out of 10 in-terms of being lucrative for the crypto sector.
Given the grown interest in crypto among its citizens, the country has also amended its Anti-Money Laundering (AML) and Counter-Terrorist Financing (Amendment) Bill 2022, to now include crypto transactions as well.
Introducing a CBDC in its financial system is a decision that Hong Kong has started acting upon after due consideration.
Built on blockchain networks, a CBDC, or a Central Bank Digital Currency, is a virtual representation of a country’s fiat currency. Replacing physical notes with CBDCs not only reduces the cost of managing them, but also adds a layer of unchangeable permanency in maintaining financial records.