The People’s Bank of China (PBOC) and the Hong Kong Monetary Authority (HKMA) are in the second phase of the integration tests of the digital yuan for payments and cross-border transactions in Hong Kong. This new phase includes more banks and the ability to use the Fast Payment System to top up digital yuan wallets.
China and Hong Kong to Develop Digital Yuan Payment System Integrations
The People’s Bank of China (PBOC) and the Hong Kong Monetary Authority (HKMA) are conducting technical tests to bring a higher degree of integration of the digital yuan into Hong Kong’s economy. According to reports from Global Times, the institutions are already in the second integration phase, which contemplates the inclusion of more banks in Hong Kong to the system and the usage of the Faster Payments system to top up digital yuan wallets.
One of the companies that will be facilitating these operations is Octopus Cards Limited (OCL), a startup with high penetration in Hong Kong exploring “new digital yuan application scenarios, with a view to benefitting both mainland visitors to Hong Kong and Hong Kong residents visiting the mainland,” the secretary for Financial Services and the Treasury of the Hong Kong Special Administrative Region (HKSAR) Christopher Hui Ching-yu stated.
Hong Kong as an International Finance Hub
The integration of the Chinese central bank digital currency (CBDC) in the Hong Kong economy seeks to position the area as an international finance hub, as countries that are part of the Belt and Road initiative, a project to establish trading links between several countries of the world and China, have an increasing demand of investment projects and effective cross border payment solutions.
Wang Peng, a researcher at the Beijing Academy of Social Sciences, declared:
The launch of digital yuan will enhance the efficiency and user experience of cross-border payment services, attracting more international enterprises and investors to use the yuan for cross-border transactions, thereby bringing more vitality and opportunities to Hong Kong’s financial market.
China had already announced it was moving to collaborate with Hong Kong to integrate its CBDC for mutual payments. During the Hong Kong Fintech Week, Di Gang, deputy director-general of the Digital Currency Institute of the PBOC, revealed that the bank was considering the application of the digital yuan to settle commodities transactions, including natural gas, oil, and other services between Hong Kong and the mainland.
The digital yuan would be beneficial for companies to avoid paying high fees using traditional payment channels for these settlements, Di stressed.
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