Hong Kong Monetary Authority Releases CBDC Whitepaper to Study Prospect of e-HKD

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Hong Kong’s Monetary Authority, its de facto central financial institution, has launched a whitepaper on retail central financial institution digital currencies (CBDCs) whereas it continues to discover the potential of a digital Hong Kong greenback (e-HKD) for its home and cross-border markets.

The white paper was printed Monday by the Hong Kong Monetary Authority (HKMA), which is the de-facto central financial institution of the town who’s official title is the Hong Kong Special Administration of the People’s Republic of China.“

Under the “One Country, Two Systems” framework underneath which Hong Kong is ruled, Hong Kong maintains its personal monetary and judicial programs, amongst others, individually from the Chinese mainland.

The paper, titled “e-HKD: A technical perspective,” explores potential architectures and design choices because it relates to the development of the infrastructure for distributing e-HKD.

“The knowledge gained from this research, together with the experience we acquired from other CBDC projects, would help inform further consideration and deliberation on the technical design of the e-HKD,” HKMA Chief Executive Eddie Yue mentioned in a press release on Monday.

The financial institution mentioned its whitepaper is “the first” amongst comparable papers printed by central banks that particulars transaction traceability whereas preserving privateness as a key technical characteristic.

“The architecture proposed in this whitepaper is most notable for its ability to flexibly and efficiently instantiate different two-tier distribution models of rCBDC while achieving breakthroughs in privacy-preserving transaction traceability and cross-ledger synchronization of decoupled ledgers,” the authority mentioned in its paper.

HKMA’s analysis consisted of seven main areas of concern which analyzed the advantages and shortcomings of CBDCs as they apply to privateness, interoperability, scalability and efficiency, cybersecurity, compliance, operational robustness and resilience in addition to their technology-enabled practical capabilities.

Under Project LionRock in 2017, the HKMA started researching CBDCs and says it has since “actively collaborated” with different central banks in broadening its data of wholesale CBDCs.

The paper additionally examined 4 main distribution fashions together with a “variant of direct CBDC model,” a “hybrid model,” an “intermediated model,” and “CBDC-backed e-money.”

The financial institution mentioned it’s looking for opinions from tutorial and trade specialists by yr’s finish underneath a proper request for a remark doc. HKMA additionally underscored its intent behind its analysis was to accumulate views, not to push forward with infrastructure growth at this stage.

“It should be noted that the proposed architecture is not a blueprint for e-HKD, nor does it approach a decision on the CBDC distribution models chosen for implementing e-HKD”, the financial institution mentioned. “Suggestions and ideas of better designs are also solicited.”

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