HKMA invites interested parties to apply in Phase 2 of the e-HKD CBDC pilot program

The Hong Kong Monetary Authority (HKMA), the central bank of Hong Kong, recently issued an invitation to interested parties to join its CBDC pilot program. The bank is about to kick off Phase 2 for its central bank digital currency, e-HKD, and is waiting for those interested to file their applications.

Any organizations interested in joining Phase 2 and collaborating with HKMA on further development of its CBDC can submit their applications in the next two months. The deadline for applying for participation is May 17, 2024.

What will Phase 2 explore?

HKMA concluded the first phase of its e-HKD Pilot Program last year, in October 2023. This first phase focused on studying domestic retail use cases in different areas, including settlements of tokenized assets, offline payments, and programmable payments.

Now, it is preparing to delve deeper into selected pilots from Phase 1, which is what Phase 2 will be focused on. The bank’s interest is on pilots where e-HKD could provide unique value and achieve something that was not possible for traditional currencies.

Some examples include things like programmability, atomic settlement, and tokenization. In addition to that, it will explore new use cases that were not covered in Phase 1, in hopes of finding something new where e-HKD can bring a significant change.

Phase 2 will be supported by an enhanced e-HKD sandbox, which will help rapid development, prototyping, and testing of various use cases. This will be done by participants in the pilot program. Furthermore, the new sandbox will also be built on the research conducted for Project Ensemble. This is a new wholesale CBDC (wCBDC), which will primarily focus on tokenized deposits that commercial banks might issue and make available to the general public.

HSBC to rejoin for Phase 2

As mentioned, Phase 1 was concluded in October, when the central bank completed the first trial run of the CBDC. The trials saw participation of 16 banks and payment firms, alongside a small group of clients.

The program tested six scenarios in which the CBDC could be used, including online payments, payments in shops and restaurants, tokenized deposits, the collection of government payouts, tokenized asset settlement, and Web3 trading and clearing.

This was the first big step toward introducing a virtual currency that the public may eventually use for transferring money, dining out, or everyday shopping. HSBC, the biggest bank in Hong Kong, participated in Phase 1 of the program, and it already said that it intends to join Phase 2.