Yesterday the Hong Kong Monetary Authority (HKMA) issued a discussion paper on a potential e-HKD. It focused on the policy and design issues of a central bank digital currency (CBDC), but in exploring the CBDC motivations, it struggled to find any strong justification apart from innovation. The HKMA has opened a public consultation on the topic.
Last year the central bank issued a technical paper relating to a retail CBDC. As part of Project Lion Rock it has been exploring a wholesale CBDC since 2017. And more recently, it has been involved in the M-CBDC Bridge Project for wholesale cross border payments with the BIS and central banks of China, Thailand and the UAE.
Typical drivers for a retail CBDC involve a decline in cash usage and/or a need to encourage financial inclusion. For example, mainland China cites both of these as justifications for its eCNY. However, in Hong Kong’s case, there’s a high rate of inclusion and cash is still widely used.
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