Hong Kong Introduces 'Digital Yuan' Usable in Mainland China

Hong Kong Enables Opening of Digital Yuan Wallet
First City Outside China to Do So

Hong Kong has introduced a digital yuan (e-CNY) payment system that can be used in mainland China.

According to Bloomberg and other sources on the 18th, the Hong Kong Monetary Authority (HKMA), which serves as Hong Kong's central bank, announced in a statement the previous day that Hong Kong residents can open digital yuan wallets with Bank of China, Bank of Communications, China Construction Bank, and Industrial and Commercial Bank of China to use for payments in mainland China.

Digital Yuan on Mobile Phones

Opening a digital yuan wallet is possible without a separate bank account. The digital yuan wallet can be topped up using only a mobile phone number. It uses an instant payment system called 'FPS' through 17 commercial banks in Hong Kong. It can be used in the so-called 'Greater Bay' area connecting Guangdong Province, Hong Kong, and Macau, as well as other pilot areas within China.

Hong Kong has become the first city outside mainland China where digital yuan wallets can be opened. This move is interpreted as part of the Chinese authorities' plan to develop Hong Kong as a global financial hub. Hong Kong is competing with Singapore, Dubai, and others for leadership as Asia's virtual asset hub, and since the end of last month, it has started trading Bitcoin and Ethereum spot exchange-traded funds (ETFs) for the first time in Asia.

China began researching digital currency in 2014 and has been conducting digital yuan pilot projects centered on some pilot cities since the second half of 2019. The current circulation of digital yuan amounts to a total of 16.5 billion yuan (approximately 3.1 trillion won) as of the end of June last year, which is about 0.16% of the base money (M0).

The Hong Kong Monetary Authority stated, "We will continue to work closely with the People's Bank of China to expand the application scope of the digital yuan and enhance the convenience of transactions between China and Hong Kong."