Hong Kong plans to expand the utilization of mainland China’s digital currency, the digital yuan (e-CNY), enabling its use for retail transactions within the city. This action signifies a notable progress in Beijing’s continuous endeavors to globalize the yuan in the wake of escalating geopolitical tensions.
The Chinese government-supported program will allow residents of both mainland China and Hong Kong to create digital yuan wallets using a smartphone application developed by the central bank of China. These wallets will have practical functionality at brick-and-mortar retail stores as well as select online merchants in Hong Kong and mainland China. This development represents a significant milestone in the extension of the digital currency beyond mainland China.
In June 2023, the total value of transactions made with the digital yuan amounted to an impressive 1.8 trillion yuan ($249.27 billion). Additionally, there were more than 120 million active digital wallets being used. The currency is widely accepted by over 10 million businesses in 17 provinces and cities throughout mainland China, showcasing its increasing acceptance and usefulness.
The digital yuan in Hong Kong is subject to particular limits to guarantee the security of transactions. The Hong Kong Monetary Authority (HKMA) has set a balance restriction of 10,000 yuan for each wallet. Additionally, transactions are restricted to a maximum of 2,000 yuan per transaction and 5,000 yuan each day. At first, peer-to-peer transfers will be prohibited.
Eddie Yue, the Chief of HKMA, highlighted the advantageous nature of this initiative for the inhabitants of Hong Kong. The speaker noted that by extending the e-CNY pilot program in Hong Kong, users may now conveniently add funds to their digital wallets without the need to open a bank account in mainland China. This would enable Hong Kong residents to make payments to merchants in mainland China more easily.
Several prominent Chinese banks, such as the Industrial and Commercial Bank of China, Bank of China Ltd, China Construction Bank Corp, and Bank of Communications Co, have been chosen to manage e-CNY wallets. This development not only demonstrates the usefulness of the digital yuan, but also serves as a strategic maneuver to strengthen its position in the global financial landscape, where it has been steadily gaining influence.
The incorporation of the digital yuan in Hong Kong is a noteworthy achievement in the realm of financial technology, indicating a potential model for other areas and currencies as digital currencies progress.
