HKMA’s CBDC Initiative: A Deep Dive

The Hong Kong Monetary Authority (HKMA) has officially stepped into the realm of cryptocurrencies with its research into a central bank digital currency (CBDC). Announced during the recent Hong Kong Fintech Week on November 7, this news is as exciting as finding a twenty-dollar bill in last season’s coat pocket. Expectations are high, as HKMA aims to unveil a significant report on its findings by Q1 2020.

Collaborative Ventures with the People’s Bank of China

In an effort to bolster its CBDC research, the HKMA has signed a blockchain collaboration with a subsidiary of the People’s Bank of China (PBoC). Given that many anticipate the PBoC will be the first globally to launch a CBDC, this partnership is akin to teaming up with the Avengers — you just know something epic is about to go down.

Project LionRock: A Closer Look

Operating under the moniker of “Project LionRock” since 2017, the endeavor repositories a wealth of collaboration, drawing contributions from Hong Kong Interbank Clearing Ltd. and several local banks, along with the blockchain consortium R3. This project dives into various areas including:

• Proof-of-concept studies on token-based CBDCs
• Research on the issuance of debt securities via blockchain
• Assessment of CBDC’s influence on payment systems
• Exploration of a two-tier issuance model allowing corporations to possess CBDC tokens as sponsored participants of banks

The key focus remains on enabling financial institutions; retail clients already enjoy the conveniences of digital mobile payment systems, as pointed out by Edmond Lau, HKMA’s senior executive director.

International Collaborations: A Move Towards Cross-Border Payments

This past May, HKMA weren’t the only ones stirring up CBDC conversations; they partnered with the Bank of Thailand to delve into using CBDCs for cross-border payments. This joint research project aims to create seamless interbank payment-versus-payment services between the two financial landscapes. It’s like a cross-cultural potluck—everyone’s bringing their best dish to make a unified meal of digital currency!

The Future: What Lies Ahead

Ethereum co-founder Joe Lubin has piped in his thoughts, suggesting that while the PBoC may implement a CBDC, it is unlikely to embrace the decentralized elements of blockchain technology. Instead, he believes it will leverage cryptographic mechanisms to maintain oversight of capital flows – basically, keeping an eye on everything like a hawk in the digital skies.

PBoC Deputy Director Mu Changchun has outlined that the CBDC will adopt a centralized two-tier structure, with the PBoC reigning at the top and domestic commercial banks managing the second tier. Meanwhile, the Bank of Thailand has already created a blockchain solution prototype for wholesale CBDC-based interbank settlements, further highlighting that the race for CBDCs in Asia is heating up.