Hong Kong's de facto central bank is developing a prototype digital currency.

The disclosure came in a Hong Kong legislative document published by the Legislative Council Panel on Financial Affair this week and dated 18th April.

According to the note, the Hong Kong Monetary Authority (HKMA), which acts as the region's central bank and finance regulator, is working with Hong Kong Interbank Clearing Limited (a clearinghouse in which it has an ownership stake), several undisclosed banks and distributed ledger startup R3 on the initiative.

The document explained:

"The first phase of the research, which explores the feasibility of [central bank-issued digital currency] in performing domestic inter-bank payments, inter-corporate payment in the wholesale market and delivery versus payment (DvP) debt securities settlement, is expected to be completed in the fourth quarter of this year. Subject to the findings of the first phase, HKMA will map out the next steps."

That the HKMA would pursue this line of inquiry is perhaps unsurprising. A growing number of central banks worldwide, including those from Canada, Singapore and the UK, have launched similar initiatives in recent months. The HKMA recently revealed that it had completed a trade finance project alongside a group of banks and R3.

The HKMA is expected to complete the proof-of-concept by the end of this year, after which further steps may be taken toward developing the digital currency project.

The institution is also planning to publish more of its internal research in the months ahead, with a new white paper expected to be released next quarter.

Image via Shutterstock


Read more about

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.