A Hong Kong official has ruled out any immediate plans to implement a central bank digital currency as it would be “broadly similar to, and not clearly superior to” the existing financial infrastructure.

In an official press release dated May 30, Joseph Chan, who is the Acting Secretary for Financial Services and the Treasury in the Legislative Council, responded to a question by Dennis Kwok, who is another member of the Legislative Council. Referring to reports that the People’s Bank of China (PBOC) is planning to issue its own digital currency, Kwok wanted to know if the Hong Kong Monetary Authority (HKMA) is planning to do the same.

No Plans at the Moment

The gist of the HKMA’s response is that, since Hong Kong’s current financial infrastructure is already efficient, a central bank digital currency (CBDC) can provide few marginal benefits. As the press release notes:

In the context of Hong Kong, the already efficient payment infrastructure and services make CBDC a less attractive proposition. The HKMA has no plan to issue CBDC at this stage.

The press release also referenced a study report that was issued as the result of a working group formed by the Bank for International Settlements (BIS). Both the PBOC and HKMA are a part of this group. While the HKMA may have rejected any immediate CBDC issuance plans, it still continues to closely study and monitor digital currencies.

In March 2017, the HKMA had announced that it had commenced research and proof-of-concept work on a potential CBDC. The recent press release appears to be a product of said research, although it notes that “CBDC remains a subject which requires further study and more proof-of-concept work to ascertain its feasibility for payment applications,” which leaves open the possibility for a future CBDC depending on further developments.

Although the HKMA appears to be somewhat positive about the potential of cryptocurrencies and blockchain technology, it has still cracked down on ICOs to protect the investing public. Its Securities and Futures Commission told seven Hong Kong and Hong Kong-related cryptocurrency exchanges to stop trading cryptocurrencies in February. In March, the commission halted an ICO and forced the company, Black Cell Technology, to unwind all transactions.

Pile of many Hong Kong Dollar banknotes. Source: Shutterstock.com
Pile of many Hong Kong Dollar banknotes. Source: Shutterstock.com

Many Central Banks Are Studying and Developing Their Own Digital Currencies

Although regulatory authorities remain largely skeptical of cryptocurrencies and ICOs in particular because of the risk they pose to investors; many central banks are undertaking serious study and implementation of digital currencies.

The BIS has urged central banks to continue to study the risks and rewards of digital currencies. A study by the University of Cambridge’s Centre for Alternative Finance conducted in late 2017 found that 63% of central banks surveyed are already involved in proofs of concepts and running trials.

Percentage of central banks investigating the listed use of cases. Source: Cambridge Centre for Alternative Finance
Percentage of central banks investigating the listed use of cases. Source: Cambridge Centre for Alternative Finance

In Asia for instance, the Monetary Authority of Singapore has Project Ubin, which is a collaborative project with the financial industry for using blockchain technology for payment and securities settlement. Japanese banks are exploring their own cryptocurrency, which is dubbed the J-Coin. Over in Europe, Estonia may be planning to launch its own “Estcoin,” while, in the Middle East, the UAE and Saudi Arabia are jointly working to launch their own digital currency.

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