Today the Hong Kong Monetary Authority (HKMA) announced that it will collaborate with the People’s Bank of China (PBOC) on its central bank digital currency (CBDC). The central banks signed a memorandum of understanding to link Hong Kong with the PBOC’s trade finance blockchain.
The partnership was solidified today between the PBOC’s Digital Currency Institute and Hong Kong Interbank Clearing. According to Chinese media, the two will begin working on a proof of concept early next year. It hopes to streamline trade financing and bring the benefits of blockchain to Hong Kong banks.
Linking trade finance blockchains
China’s trade finance blockchain, also known as the ‘Bay Area Trade Finance Blockchain Platform” (BATFB)’, was built in conjunction with the Digital Currency Institute. As we reported four months ago, it had processed $4.5 billion (30 billion Yuan) and had 28 bank members since its launch in September last year.
Now, as Sina claims, the platform has 29 banks, accounting for 485 branches in Shenzhen, with another 10 in the process of joining. It has further completed over 5000 transactions with 1898 enterprises, amounting to a business volume of $11 billion (75 billion Yuan).
Today’s collaboration aims to integrate the BATFB with Hong Kong’s own trade finance blockchain, eTradeConnect. Many of the banks are active on both platforms through subsidiaries. The Hong Kong network’s members include multiple Chinese bank subsidiaries as well as international banks such as ANZ, HSBC, Standard Chartered, and Singapore’s DBS Bank. eTradeConnect was developed by China-based OneConnect, a subsidiary of Ping An, and launched in October 2018.
Collaboration on the cards
Both initiatives had plans to work with overseas counterparts. China’s platform was seeing relatively slow growth due to lack of foreign adoption and the HKMA’s Howard Lee said last year: “Our next key milestone is to link eTradeConnect with platforms from other regions”.
Back then, Hong Kong’s central bank had signed agreements with the Monetary Authority of Singapore and the we.trade platform. In a speech today, the Chief Executive of the HKMA, Eddie Yue, shared an update on these partnerships along with newer ones.
“We have conducted pilot schemes with our peers in the region to try out blockchain solutions. For example, we have started a joint research project with the Bank of Thailand on implementing central bank digital currency in cross-border payments,” Yue stated.
He continued: “We have also completed a proof-of-concept test with the we.trade platform to connect the digital trade finance platforms of Hong Kong and Europe. So far, it looks quite promising, and we have engaged Mainland China and Singapore on similar connections.”
Huawei to work on CBDC?
The partnership between the HKMA and China’s digital currency arm is not the only CBDC news. Also today, it was reported that tech firm Huawei will cooperate with the PBOC on the project. As the world’s leading telecoms supplier, Huawei has developed database and networking software to handle massive amounts of traffic, which will be instrumental in managing the digital currency.
Huawei’s possible involvement is yet another concern to the US. Not only is it likely that the China CBDC hopes to rival the dollar, but Huawei is controversially blacklisted in the nation due to allegations of spying. Similarly, the firm is blocked from accessing the UK’s 5G network and effectively banned from official contracts in Japan.