The Hong Kong Monetary Authority has published a white paper to the public that outlines the technical architecture of the digital Hong Kong dollar, also known as e-HKD.
World states are paying more and more attention to digital currencies. In an effort not to lose the competition to a new asset class, many departments are trying to join the "movement" by developing their own national tokens. Hong Kong became one of these states.
Work on the Hong Kong CBDC began back in 2017. The project was codenamed Project LionRock. In 2019, HKMA, together with the Bank of Thailand, tested cross-border CBDC transactions under the Inthanon-LionRock program, limiting itself to verifying transfers between financial institutions. In 2020, the project changed its name to mBridge (Multiple CBDC Bridge), and in February 2021, the Hong Kong department decided to increase the scale of testing, connecting the People's Bank of China and the Central Bank of the United Arab Emirates to it. In June of this year, HKMA representatives proclaimed Fintech 2025, an initiative designed to foster financial innovation while modernizing the region's economy. Fintech 2025 also provides for the study of digital currency and its inherent introduction into everyday life.
The Hong Kong CBDC white paper suggests a two-tier model of wholesale and retail. The first is intended only for financial intermediaries such as banks, payment service providers, and other trusted participants. The second one offers access to the CBDC to the general public, being an open and transparent system. Thus, HKMA will be responsible for issuing CBDC and providing tokens to trustees, and they, in turn, will be responsible for the circulation and distribution of these tokens.
HKMA CEO Eddie Yue stated that a white paper was the first step towards a technical study of e-HKD. Yue argues that the experience gained from this study and through the development of the CBDC will assist them in the possible integration of the digital Hong Kong dollar. However, the financial regulator has not yet decided whether it will introduce a new asset in the region.
At the same time, studying the issue of integrating your own token helped identify seven main characteristics for an innovative currency:
- fault tolerance
- operational reliability
- compliance with regulatory requirements
- wide functionality
Now HKMA expects proposals to improve the presented technological infrastructure of the project from specialists in the financial and cryptocurrency industry. The collection of opinions and comments is scheduled until December 31, and in 2022 the department will finally determine the vector for the development of e-HKD.
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