Hong Kong Monetary Authority: Closely follow the mainland's digital currency pilot program and actively cooperate in cross-border use

Source: 21st Century Business Herald

Author: Juliana

Original title: Hong Kong Monetary Authority Yu Weiwen: Jointly research digital currency with the Bank of Thailand, 19 banks participate in the test

Hong Kong Monetary Authority Chief Executive Eddie Yue said on November 2 at an event at Hong Kong Fintech Week that the Hong Kong Monetary Authority is working with the Bank of Thailand to explore the establishment of a blockchain-based central bank digital currency to improve cross-border payment efficiency.

As an international financial centre, Hong Kong is also committed to improving cross-border banking services. The current correspondent banking system for handling international remittances has many shortcomings. It is not only inefficient, but also costly and opaque. Central banks in various countries are also aware of these problems.

Yu Weiwen revealed that the Bank for International Settlements has set up a task force to study how to apply technology to improve cross-border banking, and the Hong Kong Monetary Authority is one of the main participants. He said that at present, a proof-of-concept prototype of "point-to-point" instant cross-border transfer of funds has been developed, and the next step will be to explore commercial application scenarios, such as cross-border trade settlement and capital market transactions. After that, banks and large enterprises will be arranged to test the network with actual transactions.

Looking ahead, Yu Weiwen said that the network will be further expanded to platforms that can accommodate multiple central bank digital currencies. Through the central bank digital currency at the wholesale level, e-wallet service providers can provide retail services to travelers, such as remittances and cross-border payments.

19 banks participated in the test

Hong Kong Monetary Authority officials revealed at the Legislative Council meeting on November 2 that Hong Kong is one of the first regions to join the Bank for International Settlements Innovation Hub. The joint digital currency research with the Bank of Thailand has entered the second phase, and will invite enterprises and banks from both sides to enter the payment platform for trade settlement and foreign exchange transactions without going through agent banks. The number of test banks has increased to 19.

According to a reporter from 21st Century Business Herald, the Inthanon-LionRock project, a joint digital currency research program conducted by the Hong Kong Monetary Authority and the Bank of Thailand, was completed in December last year. A total of 10 participating banks from the two places successfully developed a proof-of-concept prototype based on distributed ledger technology. Hong Kong's HSBC and virtual bank ZA Bank also participated in the above research.

The platform plans to develop a "Baht-Hong Kong Dollar Cross-Border Corridor Network Prototype" based on blockchain distributed ledger technology, which will enable banks in Hong Kong and Thailand to conduct fund transfers and foreign exchange transactions in a peer-to-peer manner, improve the efficiency and transparency of cross-border fund transfers, and reduce reporting procedures and costs. Currently, cross-border fund transfers involve a large number of correspondent banks, and the cost is about 7% of the relevant funds.

Yi Gang, governor of the People's Bank of China, said at the same forum on November 2 that the digital RMB has been smoothly piloted in four cities and can be used through "QR code" or "tap and go" in more than 120,000 places. Currently, 4 million transactions have been carried out involving 2 billion yuan. In the future, internal closed pilot tests will be carried out in the Winter Olympics scenario.

In addition, Yu Weiwen also revealed that the Hong Kong Monetary Authority is closely following the pilot program of digital currency in the Mainland. With the frequent exchanges between the two places, digital currency may be used in Hong Kong in the future. "We welcome this very much and will actively cooperate in cross-border use."

7 virtual banks attract US$1 billion in deposits

A lot has changed in Hong Kong’s banking industry since the HKMA launched its seven “Smart Banking” initiatives in 2017. Mr Yue pointed out that there are now more than 160 banks in Hong Kong, including virtual banks set up by technology giants.

He said that Hong Kong was one of the first regions in Asia to launch virtual banks, and currently has one of the highest number of virtual banks in the region. Hong Kong has many different banking service providers and platforms for consumers to choose from, and their competition has reduced service prices and improved customer experience. For example, many banks have abolished account minimum balance charges, and many banks have invested more resources to improve their digital platforms.

There are currently eight virtual banks in Hong Kong, and except for Fusion Bank, the other seven have officially opened. Hong Kong Financial Secretary Paul Chan said in his speech at the Hong Kong Fintech Week on November 2 that the seven virtual banks have attracted about 300,000 customers since their opening, with deposits reaching US$1 billion.

Among them, ZhongAn Bank, which opened first, released data showing that as of the end of June, total deposits reached HK$2.7 billion. The company said that as of the third quarter, the number of customers exceeded 180,000. Airstar Bank announced earlier that as of the end of June, total customer deposits were HK$356 million. Mox, which opened for more than a month, announced earlier that it has about 35,000 customers so far, with an average account balance of more than HK$70,000.

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