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The School of Business and Management at The Hong Kong University of Science and Technology (HKUST Business School) and a leading financial services company and bank have jointly announced the commencement of a one-week pilot programme for a hypothetical e-Hong Kong Dollar (e-HKD).
This collaboration between HKUST Business School and the bank is part of ongoing efforts by academia and the private sector to explore and experiment with the concept of a central bank digital currency (CBDC) in Hong Kong, overseen by the Hong Kong Monetary Authority.
For this pilot initiative, the bank has developed and configured a platform utilising distributed ledger technology (DLT) to simulate the payment infrastructure required for programmable money and instant settlements in various retail scenarios.
This project has garnered significant interest, with nearly 200 students and faculty members from HKUST participating in the pilot. Each participant will receive 100 hypothetical e-HKD tokens in a dedicated digital wallet, which they can spend at five on-campus merchants, including cafes and canteens, during the one-week duration of the programme.
One notable feature of this prototype digital token is its integration of smart contract functionality and programmability, allowing customers to automatically receive embedded rewards for eligible transactions. This feature aims to enhance the user experience and explore the potential benefits of CBDCs in incentivising certain behaviours.
The pilot also includes a comprehensive user experience study, conducted jointly by HKUST and the bank. The insights gathered from this pilot programme will serve as a crucial foundation for future experimentation and research in the field of CBDCs.
The Dean of HKUST Business School expressed his enthusiasm for this collaboration, stating that as Hong Kong readies itself for the possible debut of the e-HKD, they are excited to partner with the bank to launch this e-HKD pilot initiative. Leveraging the school’s fintech knowledge and the receptiveness of its students and faculty to innovative technologies, HKUST stands as a prime centre for conducting CBDC experiments and provides an ideal environment for uncovering its potential, he said.
The Chief Digital Officer Hong Kong at the bank emphasised the bank’s active involvement in CBDC projects across various markets and its ability to swiftly design, build, and operate the HKUST pilot in just four months. He noted the strong interest shown by people in participating in the programme.
Drawing on HKUST’s expertise in fintech research, the pilot programme aims to demonstrate potential benefits, with the results slated for publication in the fourth quarter of 2023. Prof Tam added that this pilot represents a pivotal milestone in the progression of e-HKD research, offering valuable insights that will assist industry stakeholders in developing a more profound comprehension of its appeal and potential function within the current payment service landscape.
The bank’s Chief Digital Officer also stated that the findings will contribute to validating the efficacy of a digital currency in both retail and broader public contexts, given the robustness of Hong Kong’s payment ecosystem. Anticipation exists for future collaborations with industry partners to leverage the potential of emerging technology in shaping the currency of tomorrow.
This pilot initiative builds on the existing collaborations between the bank and HKUST to accelerate fintech development and provide insights into future CBDC developments. As part of this strategic partnership, HKUST Business School conducted a survey last year to assess the general public’s perception of the hypothetical e-HKD, further emphasising the commitment of both institutions to exploring the possibilities and implications of digital currencies in Hong Kong.
