In-depth Study on the Introduction and Application of e-HKD in Hong Kong

Supervisor: Professor. Chow, Kam Pui

Student: Cheung, Hoi Lam (3035928720)

About my Project

Background

The rapid evolution of financial technology has prompted central banks worldwide to explore the potential of Retail Central Bank Digital Currencies (rCBDCs). As of September 2023, Project Sela—a joint experiment by the Bank for International Settlements (BIS) and the central banks of Hong Kong SAR and Israel—has proved the feasibility of an rCBDC ecosystem that combines accessibility, competition, and robust cybersecurity while maintaining the key advantages of physical cash. This initiative highlights the growing recognition of digital currencies as a means to enhance financial systems and improve consumer experiences.

Building on this foundation, the introduction of the e-HKD represents a significant step toward digitalizing Hong Kong’s financial landscape. This study aims to evaluate the potential benefits of e-HKD compared to traditional payment methods, while also addressing the challenges and compliance issues that may arise. By conducting a comparative analysis of e-HKD and its counterpart, e-CNY (the digital yuan), we will gain valuable insights into the operational and regulatory frameworks that could shape the future of digital currencies in Hong Kong.

Objectives

The primary objective of this project is to conduct a comprehensive evaluation of the e-HKD and its implications for its introduction and applications in Hong Kong.

Evaluate Potential Benefits of e-HKD

By assessing these factors, the project will provide insights into how e-HKD can enhance the overall payment experience for consumers and businesses.

Evaluate Challenges and Compliance Issues

The objective will explore what are the challenges and compliance concerns, such that how stricter regulation and monitoring mechanisms are needed to ensure the integrity of the financial system.

Analysis of e-CNY’s Introduction and Applications

By analysing these elements of e-CNY, the objective aims to identify best practices and potential pitfalls that could inform the rollout of e-HKD in Hong Kong.

Suggestions for Banks on Introducing e-HKD

Based on the evaluations and analyses conducted, the project will suggest practical strategies for banks in Hong Kong to effectively introduce e-HKD. The goal is to provide actionable insights that facilitate a smooth transition to the new digital currency.