The People’s Bank of China (PBoC) and the Hong Kong Monetary Authority (HKMA) have taken significant steps to expand the Digital Yuan (e-CNY)’s reach beyond mainland China.

On May 17, the HKMA announced a pilot scheme enabling the use of the Central Bank Digital Currency (CBDC) for cross-boundary payments.

According to the authorities, this e-CNY scheme will provide safer, more convenient, and innovative cross-border retail payments between Hong Kong and Mainland residents.

Cross-border transactions

This initiative also allows Hong Kong residents to set up personal e-CNY wallets with their mobile numbers, but they cannot perform peer-to-peer transactions among themselves.

Under this scheme, Hong Kong residents can fund their digital yuan wallets through 17 retail banks via the Faster Payment System (FPS). The statement added:

“The interoperability between the FPS and the e-CNY system operated by the Digital Currency Institute (DCI) of the PBoC also marks the first linkage of a faster payment system with a central bank digital currency system in the world.”

Eddie Yue, Chief Executive of the HKMA, stated that the e-CNY application and wallet would gradually gain more functionality as more retail merchants adopt the system. He said:

“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.”

Moreover, HKMA said it plans to upgrade the e-CNY wallets to higher tiers through real-name verification and will support corporate use cases for cross-border trade settlements in the future.

This initiative continues China’s efforts to popularize its CBDC program. The country already uses the currency to pay some of its workers monthly salaries.