First-ever digital yuan payment system for cross-border transactions piloted in Hong Kong

The People’s Bank of China (PBoC) and the Hong Kong Monetary Authority (HKMA) have made strides in extending the reach of the Digital Yuan (e-CNY) beyond mainland China. In a recent announcement on May 17, the HKMA unveiled a pilot program that allows for the use of the Central Bank Digital Currency (CBDC) for cross-border payments.

This new e-CNY scheme is designed to facilitate safer, more convenient, and innovative cross-border retail transactions between residents of Hong Kong and Mainland China. Hong Kong residents are now able to create personal e-CNY wallets linked to their mobile numbers, although they are currently unable to engage in peer-to-peer transactions among themselves.

Under this initiative, Hong Kong residents can fund their digital yuan wallets through 17 retail banks using the Faster Payment System (FPS). The collaboration between the FPS and the e-CNY system operated by the PBoC’s Digital Currency Institute marks a significant milestone as the world’s first linkage between a faster payment system and a central bank digital currency system.

Eddie Yue, Chief Executive of the HKMA, mentioned that the functionality of the e-CNY application and wallet will expand gradually as more retail merchants adopt the system. This initiative aims to support merchant payments in Mainland China by Hong Kong residents, without requiring them to open a Mainland bank account.

Furthermore, the HKMA plans to enhance the e-CNY wallets through real-name verification and intends to facilitate corporate use cases for cross-border trade settlements in the future. This step aligns with China’s ongoing efforts to promote its CBDC program, which includes using the digital yuan to pay some workers their monthly salaries.

The collaborative efforts between the PBoC and HKMA signify a significant advancement in the adoption and utilization of the Digital Yuan outside mainland China. The development of cross-border payment solutions through the e-CNY scheme demonstrates the commitment to innovation and financial inclusion in the digital currency space.