The HKMA looks forward to being a long-term partner with you on this journey, and I hope you can offer us your unwavering support too. 2/5  BIS central bankers' speeches  Future-proofing Hong Kong for Central Bank Digital Currencies (CBDCs) 20. As we look beyond banks to the wider financial system, we turn our attention to initiatives that will have an impact on the financial system as a whole, one of which is CBDCs, the focus of our second strategy. 21. As the world becomes more interconnected than ever, cross-border and cross-boundary transactions have never been more frequent. Many of us have witnessed how payment instruments have evolved over time, from banknotes to credit cards to cross-border payment networks. While CBDCs may not see mainstream adoption any time soon, this is something that has the potential to profoundly alter the global payment landscape. We must work with the industry and international community to ensure that we address both the technical and non-technical issues involved. 22. For this reason, we have been researching wholesale CBDCs as they have great potential in addressing the long-standing pain points in cross-border payments. Lately, the HKMA’s joint research with the Bank of Thailand has been ranked by the market as one of the most mature of its kind in the world; a testimony that we stand at the forefront in the realm of wholesale CBDCs. We recently expanded the scale of the project to include more participating jurisdictions. 23.
Some of you may already be aware that the HKMA has begun researching retail CBDCs (rCBDCs). We have been working with the Bank for International Settlements (BIS) Innovation Hub Hong Kong Centre on Project Aurum, which will focus on the technical aspect of issuing r-CBDCs and the possible architectural designs. 24. Similar to the majority of central banks, we see that a lot of issues need to be thought through before issuing r-CBDC. For instance, how should we strike a right balance between privacy and traceability? How do we mitigate cybersecurity risks? How will it affect the effectiveness of monetary transmission? These are important questions that need to be answered before reaching a conclusion. 25. Against this backdrop, the HKMA will soon begin a comprehensive study on e-HKD to understand its use cases, benefits, and related risks. This is to increase our technical readiness so that we are prepared for all kinds of circumstances in the future, including the potential for Hong Kong to issue e-HKD. We have already established an internal crossdepartmental working group within the HKMA to study the relevant technical, policy and legal issues, and we hope to offer our initial thought on this complex matter in 12 months’ time. 26. Needless to say, CBDC will remain one of the most important topics among the global central banking community in the months or years to come. The HKMA will continue to work with the BIS and other international institutions to prepare Hong Kong for the evolving landscape. Creating the next-generation Data infrastructure 27.