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The city’s de facto central bank is prospecting the potential of a digital Hong Kong dollar for transborder and domestic markets. The whitepaper is the first of its kind published by a central bank and aims to preserve privacy while exploring transaction traceability.
Introducing the e-HKD
Hong Kong’s Monetary Authority, serving the function of central bank, is probing retail central bank digital currencies (CBDCs) as it looks into the potential of the e-HKD. The paper was published yesterday. Hong Kong maintains autonomous justice and financial systems under the “One Country, Two Systems” framework governing the city. The paper, titled “e-HKD: A technical perspective,” looks into the design and architecture options related to developing infrastructure for distributing e-HKD.
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Monetary Authority Chief Executive Eddie Yue said in a press release:
The knowledge gained from this research, together with the experience we acquired from other CBDC projects, would help inform further consideration and deliberation on the technical design of the e-HKD.
According to the bank, this whitepaper makes history. They wrote in the paper:
The architecture proposed in this whitepaper is most notable for its ability to flexibly and efficiently instantiate different two-tier distribution models of rCBDC while achieving breakthroughs in privacy-preserving transaction traceability and cross-ledger synchronization of decoupled ledgers.
The bank researched seven main areas, all related to the pluses and minuses of digital central bank currencies as they affect scalability and performance, privacy, interoperability, cybersecurity, compliance, resilience, operational robustness, and technology-enabled functional capabilities.
The bank said:
It should be noted that the proposed architecture is not a blueprint for e-HKD, nor does it approach a decision on the CBDC distribution models chosen for implementing e-HKD. Suggestions and ideas of better designs are also solicited.
Among the distribution models studied in the paper were a hybrid model, a direct CBDC model, and an intermediated model. With a formal request, the bank will be looking for opinions from industry and academic experts by the end of the year. The bank emphasized its purpose was to collect views at this point, not to further infrastructure development.