<p>A senior Hong Kong official announced last week that the Chinese autonomous territory plans to expand its pilot program of the e-CNY, China’s digital yuan, to include additional banks and payment platforms.</p><h2 id="header-0">Driving cross-border payment efficiency</h2><p>The e-CNY project is China’s ambitious endeavor to bring a digital counterpart to its national currency, the yuan, into mass market, everyday use. The primary objectives of this latest initiative are to enhance the efficiency and convenience of cross-border payments and to bolster greater use of the digital yuan on an international basis.</p><p>Given Hong Kong’s status as a special administrative region of China and bearing in mind that it is a global financial hub, its role in the e-CNY project is likely to be of paramount importance to the Chinese administration.</p><p>Hong Kong has been actively involved in the e-CNY project for some time. Previously, the local regulator, the Hong Kong Monetary Authority (HKMA), and the People’s Bank of China (PBOC) jointly explored and tested e-CNY’s feasibility and interoperability in cross-border scenarios.</p><h2 id="header-1">Ongoing collaboration</h2><p>Over the years, these two authorities have conducted numerous technical trials to assess the practicality of implementing the e-CNY. The PBOC initiated e-CNY testing in mainland cities in 2019, followed by cross-border trials involving Hong Kong and Macau. Collaboration between Hong Kong and the mainland relative to the digital yuan was <a href="https://www.hkma.gov.hk/eng/news-and-media/insight/2020/12/20201204/" rel="noopener noreferrer nofollow">initiated</a> in December 2020 when a pilot program was launched.</p><p>That program enabled Hong Kong residents to utilize e-CNY wallets for purchases at specified merchants in Shenzhen, <a href="https://www.hkma.gov.hk/eng/news-and-media/press-releases/2021/10/20211021-4/" rel="noopener noreferrer nofollow">aligning</a> at the same time with a separate initiative, the objective of which is to achieve closer economic and social integration between Hong Kong, Macau, and nine cities in Guangdong province.</p><p>Hong Kong and Mainland China had also partnered on technical testing in 2021 aimed at evaluating the technical feasibility, operational efficiency, regulatory implications, and legal considerations of employing the e-CNY for cross-border trade settlement between the two areas. That testing program is likely to be providing valuable insights, which Chinese authorities can use to expand the e-CNY’s scope and use cases relative to cross-border transactions.</p><h2 id="header-2">Completion of initial testing phase</h2><p>Hong Kong recently successfully concluded the first phase of its e-CNY trial, featuring local banks and the Hong Kong Monetary Authority (HKMA). This phase primarily focused on assessing the technical feasibility of employing the e-CNY for cross-border payments between Hong Kong residents and mainland merchants.</p><p>What Christopher Hui, Secretary for Hong Kong’s Financial Services and the Treasury, was<a href="https://www.theblock.co/post/249655/hong-kong-expands-trial-of-chinas-digital-yuan-to-more-banks-says-official" rel="noopener noreferrer nofollow"> referring</a> to last week at a fintech event, is effectively the second phase of that overall trial program. This upcoming phase will involve a broader array of banks, payment service providers, and use cases, expanding the scope of e-CNY testing.</p><p>Taking this latest development into account from the point of view of e-CNY development by the Chinese government, it’s patently obvious from the myriad of initiatives that keep coming week after week that the Chinese authorities are determined to drive the e-CNY towards ever greater real-world use.</p>

Hong Kong Broadens Pilot Program for China’s Digital Yuan

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