The Hong Kong Monetary Authority (HKMA) on Monday released a white paper proposing potential technical architecture and design for the infrastructure of a digital Hong Kong dollar. The paper is one of the deliverables described in Project e-HKD, a feasibility study the HKMA announced in June 2021.
- Hong Kong began its exploration of a digital Hong Kong dollar, e-HKD, in 2017. The effort was dubbed Project LionRock.
- Significantly, the HKMA and the Bank of Thailand launched Project Inthanon-LionRock, a test of cross-border transactions of wholesale central bank-backed digital currencies (CBDC), in December 2019. Wholesale CBDC are limited to transactions between financial institutions.
- In February 2021, the two central banks widened the scope of their cross-border experiment, adding participation by the central banks of China and the United Arab Emirates and launching a multiple CBDC cross-border bridge.
- The technical white paper released Monday proposes a dual infrastructure for both wholesale and retail CBDC. Retail CBDC is digital currency for individual and general-purpose use, particularly how banks distribute CBDC to consumers.
- The proposed architecture’s salient breakthrough, according to the HKMA, is its ability to protect the privacy of transactions.
- The HKMA outlined seven problem statements with the proposed infrastructure — privacy, interoperability, performance and scalability, cybersecurity, compliance, operational robustness and resilience, and technology-enabled functional capabilities — and requested comments by year’s end from academia and industry addressing these issues.
- The next deliverable from the HKMA is a legal and policy analysis, expected by June 2022.