Hong Kong made headlines as the first region outside mainland China to allow users to open digital wallets and hold China’s CBDC e-CNY, also known as the digital yuan. The Hong Kong Monetary Authority (HKMA) announced that both permanent residents and foreign nationals living in Hong Kong can now open e-CNY wallets with their local mobile phone numbers using four major mainland Chinese state-owned banks. The accredited banks that are licensed to facilitate CBDC wallet opening in Hong Kong include the Bank of China, the Bank of Communications, the China Construction Bank, and the Industrial & Commercial Bank of China.
The HKMA and the People’s Bank of China have expanded the scope of the e-CNY pilot program in Hong Kong, providing key benefits for Hong Kong residents. These benefits include the ability to open e-CNY wallets with a local mobile number, top up e-CNY wallets via the Faster Payment System provided by 17 Hong Kong banks, and use e-CNY to make retail payments in pilot cities in the mainland. Howard Lee, the Deputy Chief Executive of the HKMA, emphasized that the e-CNY wallet has the full endorsement of the People’s Bank of China and aims to provide residents with a safe and convenient option for cross-border payments when traveling to the Greater Bay Area integration zone.
The move to introduce the digital yuan in Hong Kong has raised concerns among local retailers who fear that the increased adoption of mobile payments in mainland cities like Shenzhen could divert consumption away from Hong Kong. Currently, around 300 merchants in Hong Kong accept e-CNY payments, subject to certain limits such as wallet balances capped at ¥10,000, single transaction limits of ¥2,000, and annual spending restrictions of ¥50,000. Hong Kong residents can top up their wallets via the Faster Payment System, which has been integrated with the e-CNY payment infrastructure.
Senior economist Gary Ng of Natixis Hong Kong describes the introduction of the digital yuan in Hong Kong as a significant move towards the internationalization of the yuan. He predicts that more companies will adopt the system in the future, following the recent surge in domestic transactions facilitated by the digital yuan in mainland China. As of the end of June 2023, domestic transactions using the digital yuan reached 1.8 trillion yuan, driven by the opening of over 120 million individual e-CNY wallets nationwide, with over 29 million digital yuan wallets opened in Suzhou. Despite these growth trends, many Chinese workers still prefer converting their e-CNY into fiat currency due to perceived lack of utility and privacy concerns.
