Hong Kong begins CBDC pilot phase 2 to explore wider use cases

Hong Kong is moving forward with the second phase of its central bank digital currency (CBDC) pilot, as it seeks to explore wider use cases. The Hong Kong Monetary Authority (HKMA) announced that the phase 2 of the e-HKD pilot program will focus on programmability, tokenization, and atomic settlement. The central bank is open to innovative submissions from financial service providers and blockchain firms that propose unique use cases for the CBDC. The HKMA will select proposals based on their merits and prioritize those that differ significantly from existing solutions. The CBDC use cases should be customer-centric, tested with participants from phase 1, and compliant with regulatory standards. The deadline for submitting applications is May 17, 2024. In the first phase of the pilot, the HKMA explored concepts such as offline payments, tokenized deposits, cross-border payments, and settlement of tokenized asset transactions. The results of the first phase will be further evaluated to determine their potential for real-life applications. Hong Kong also established a CBDC expert group to guide the development of the digital currency, with a focus on retail functionalities. Additionally, there are plans to develop a wholesale CBDC to enhance the tokenization market through a separate pilot study called Project Ensemble.