The Hong Kong Monetary Authority (HKMA) and the People’s Bank of China (PBoC) have announced that residents in Hong Kong will now be able to use the digital yuan, also known as e-CNY, for cross-border transactions. This marks the first application of the central bank digital currency (CBDC) outside of mainland China.
Users will be able to set up their digital wallets with just a phone number and immediately use them for cross-border payments without needing to open a bank account.
Though it’s a significant step for the digital currency, many had hoped the launch would include P2P payments, which it currently does not. However, users will be able to visit physical banks in the region and fund their wallets using the country’s Faster Payments System (FPS).
Eddie Yue, Chief Executive of the HKMA, noted: “By expanding the e-CNY pilot in Hong Kong and leveraging the 24/7 operating hours and real-time transfer advantages of the FPS, users may now top up their e-CNY wallets anytime, anywhere without having to open a mainland bank account, thereby facilitating merchant payments in the mainland by Hong Kong residents.”
A Digital Explosion
Digital yuan transactions have surged in recent years, and China recently reported that its citizens paid 1.8 trillion yuan ($249.27 billion) in CBDC to retailers as of June 2023. China estimates there are 120 million digital wallets in use in the country.
Hong Kong users will now be able to pay the 10 million merchants across China with the same ease mainlanders enjoy. However, there will be transaction limits set at 2,000 yuan for single transactions and 5,000 yuan per day.
Expanding Acceptance
China is at the forefront of the mobile payments revolution, with many retailers in the country not accepting any other form of payment. Expanding the digital yuan’s use is a critical step to keep Hong Kong residents connected.
“We will continue to work closely with the PBoC to gradually expand the applications of e-CNY, enrich the range of functionalities of the e-CNY wallet available to Hong Kong residents and step up efforts in promoting the acceptance of e-CNY by more retail merchants in the two places,” Yue said.