Cross-Border Digital Payments Trial to Start by Year-End
What’s new: A trial of cross-border payments using central bank digital currencies (CBDCs) is expected to begin by the end of 2021, Hong Kong Monetary Authority (HKMA) Chief Executive Eddie Yue said.
The test will involve banks and exchanges in Hong Kong, the Chinese mainland, Thailand and the United Arab Emirates, Yue said Tuesday at a seminar in Hong Kong. He addressed an update on the multi-CBDC program to Agustín Carstens, the general manager of the Bank of International Settlements (BIS).
The HKMA, the city’s de facto central bank, initiated the program in 2019 by working with the Bank of Thailand to build a prototype of the platform, known as the “m-CBDC Bridge.” The program has progressed smoothly and entered a second phase in February as the People’s Bank of China and the central bank of the United Arab Emirates joined, along with the BIS as the project coordinator, Yue said.
The results of the phase two study are expected to be disclosed in a few months, Yue said. If everything goes well, cross-border payments will be available in real time across four jurisdictions.
“If that is successful, it will actually go a long way in advancing a cross-border payment solution for everybody,” he said.
Stock exchanges in Hong Kong and Thailand as well as 30 banks in Hong Kong, the Chinese mainland, Thailand and the UAE will participate in the third phase by putting real-time transactions on the platform, Yue said.
“If phase three proves to be successful, we can actually commercialize it,” Yue said.
The background: The m-CBDC Bridge project aims to facilitate real-time cross-border foreign exchange transactions in a multi-jurisdictional context and explore cross-border business use cases employing both domestic and foreign currencies. The HKMA says it expects the project to solve problems associated with cross-border fund transfers including inefficiencies, high costs and complex regulatory compliance.
Hong Kong is also helping the Chinese mainland to test its digital yuan for cross-border payments. The central bank chose Bank of China (Hong Kong) Ltd., the local subsidiary of Bank of China Ltd., for the pilot program.
Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full story in Chinese, click here.
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