Hong Kong adopts digital yuan payments through Chinese banks

Hong Kong has launched a pilot program enabling digital yuan payments through major Chinese banks, marking the first instance of China’s digital currency project being deployed outside the mainland.

Hong Kong adopts digital yuan payments through Chinese banks

Residents of Hong Kong can now open digital yuan wallets with Bank of China, Bank of Communications, China Construction Bank, and Industrial and Commercial Bank of China, allowing them to make direct payments to merchants in mainland China. This initiative was announced by Hong Kong’s de facto central bank, the Hong Kong Monetary Authority (HKMA), on Friday.

The digital yuan wallets, known as e-CNY wallets, can be set up using a Hong Kong mobile phone number and can be used within the Greater Bay Area as well as other pilot regions in China. Users can top up their wallets using the local instant payment system known as FPS.

“We will continue to work closely with the People’s Bank of China to gradually expand the application of e-CNY – another name for the digital yuan – to enrich the range of functionalities and promote the acceptance of the digital yuan by more retail merchants in both Hong Kong and China,” said Eddie Yue, Chief Executive of the HKMA, in a statement. Hong Kong is the first place outside mainland China where residents can set up e-CNY wallets, according to the HKMA.

Since the pilot launch of e-CNY in several cities in 2020, China has rolled out digital yuan wallets to about 260 million users. However, challenges for broader adoption include the existing popularity of payment platforms such as Alipay and WeChat Pay, along with privacy concerns.

Chinese authorities are actively pushing to increase the yuan’s share of the global payments market. Data tracked by Swift shows that the total amount of payments settled in yuan has risen almost 1.5 times from a low base since last year.

China’s e-CNY stands out as one of the most advanced central bank digital currency (CBDC) projects among the world’s major economies. While the initial focus of the project is domestic, cross-border trials in Hong Kong have been gaining momentum.

China’s latest stride in its digital yuan pilot involves connecting its CBDC platform with Hong Kong’s FPS. This merger is set to expedite cross-border digital yuan transactions and enhance the interoperability between China’s CBDC and global payment networks.

Conceptualized by the Hong Kong Monetary Authority (HKMA) – the territory’s central bank and primary financial regulator – the FPS acts as an inter-bank connectivity tool. The platform facilitates seamless P2P transfers, e-wallet top-ups, and online shopping, reflecting the HKMA’s vision of simplifying payment processes.