Hong Kong still weighing whether retail CBDC benefits outweigh the risks

Hong Kong is currently evaluating whether the benefits of introducing a retail central bank digital currency (CBDC) outweigh the associated risks. The Hong Kong Monetary Authority (HKMA) has been actively exploring innovations in digital payments, including CBDCs, stablecoins, and tokenized deposits. While the HKMA believes in the potential of a retail CBDC to enhance interoperability within the digital economy, it acknowledges the challenges and risks involved. Further research is needed to understand the broader impact on the financial system before making a decision. However, the HKMA considers a wholesale CBDC crucial for its vision of a digital future, as it will underpin various forms of digital money. The bank has already launched Project Ensemble to settle interbank transactions using the wholesale CBDC. Despite being generally efficient and competitive in terms of digital payment systems, Hong Kong may not face the same urgency for a retail CBDC as other countries. The HKMA remains responsive, open-minded, and prudent in its regulatory approach, reflecting its positive stance on digital money, stablecoins, distributed ledger technology (DLT), and digital assets. This progressive attitude has resonated within the city’s financial industry, with institutions like ZA Bank and HSBC actively embracing digital innovations.