The Hong Kong Monetary Authority (HKMA) has said it will start laying the foundation to implement a retail central bank digital currency in a report published on Friday.
Although it had been looking into the development of a digital version of the Hong Kong dollar – dubbed "e-HKD" –since at least 2017, a recent study and comments received from "two rounds of market consultation" has convinced the HKMA that it's "necessary to at least start paving the way for possible future implementation" of a retail CBDC.
"The HKMA will therefore start work to lay the foundations for, and conduct in-depth studies and pilots on, the implementation and application of" such a currency, the report said.
Central banks around the world are increasingly exploring design options and applications for digital versions of sovereign currencies, with the Bank for International Settlements that groups monetary authorities having signaled the importance of investigating the digitalization of financial systems to maintain stability.
"While it appears that e-HKD might not have an imminent role to play in the current retail payment market, we believe prospective use cases for e-HKD can emerge quickly out of the rapid evolution, or even revolution, in the digital economy," the report HKMA's report said.
CoinDesk reported in April that the Hong Kong regulator may be leaning towards developing the e-HKD on a permissioned blockchain, and allowing private banks to handle implementation.
Although respondents in HKMA's study proposed the exploration of blockchain solutions for the e-HKD, the regulator said in Friday's report that it will be considering "various factors" from policy objectives to measures adopted by other jurisdictions "and further explore technically feasible solutions on this subject matter."