The Hong Kong Monetary Authority ( HKMA ) has completed Phase 2 of its e-HKD Pilot Programme, which evaluated the potential applications of e-HKD, a central bank digital currency, in various scenarios.  

The second phase of the programme also compared an e-HKD with tokenized deposits, a tokenized representation of bank deposits, to assess the distinctive value that an e-HKD can bring in retail scenarios.

Since 2017, the HKMA has been undertaking explorative work on e-HKD, using distributed ledger technology ( DLT ) as its foundation. This work has covered the potential applications of an e-HKD in both wholesale and retail scenarios.  

The 11 pilots under Phase 2 explored innovative use cases across three main themes, namely settlement of tokenized assets, programmability, and offline payments. 

The results of the pilots demonstrated that an e-HKD and tokenized deposits can deliver benefits by enabling cost‑efficient, programmable, and resilient transactions, the HKMA says.

High level of trust

A key finding was that the public perceived an e-HKD and tokenized deposits similarly, given the public’s high level of trust in Hong Kong’s stable banking system, underpinned by a robust supervisory regime and strong consumer protection.

As the e-HKD is issued by the HKMA and is free from credit risk, it is particularly well-suited for large-value transactions.

As such, the HKMA has concluded that the immediate priority for the e-HKD lies in areas beyond retail use cases at this stage and will hence prioritize the future e-HKD work in wholesale payments, which has already been implemented in some applications, to support the development of the tokenization ecosystem and cross-border payments, such as settlements of international trade. 

Going forward, the HKMA says, it will pursue efforts to prepare a solid policy, legal, and technical foundation, with the aim to lay the ground for potential future use of an e-HKD for individuals and corporates in Hong Kong.  

 It expects to complete this preparatory work by the first half of 2026, and the timeframe for implementing any such extension would be subject to international developments, latest technologies, and market needs. 

As one of the key outcomes of the e-HKD Industry Forum, the HKMA will publish a set of common token standards, which will serve to facilitate the scaled adoption of programmability in digital money. 

These standards are intended to provide a foundation for the potential future development and adoption of an e-HKD to serve the needs of individuals and corporates in Hong Kong, the HKMA says.

 “The two phases of the e-HKD Pilot Programme have yielded insightful findings that shape the HKMA’s understanding of the future of digital money,” HKMA chief executive Eddie Yue says.  “We are encouraged to see that the e-HKD has gradually been used in more wholesale applications by financial institutions, and we will continue to ensure Hong Kong is well-prepared for the potential future extension of the e-HKD in retail scenarios.”

Hang Seng completes two pilots

One of the participants in Phase 2 of the e-HKD Pilot Programme was Hang Seng Bank, which completed two use cases under the themes of programmability and tokenized assets settlement.

These pilots tested how an e-HKD and tokenized deposits can be applied in reward programmes and investment transactions, delivering insights into programmability, privacy, and interoperability to support the development of the digital money ecosystem.

Under digital rewards, Hang Seng, with the support of fintech firm FORMS HK, piloted programmable digital money to enhance customer engagement by issuing digital vouchers backed by hypothetical e-HKD on a rewards platform. This leveraged both private and public permissioned DLT networks.

Surveys showed that most merchant respondents from the small and medium enterprise ( SME ) sector valued the instant settlement feature of the platform for improving cash flow, which can be supported by e-HKD and tokenized deposits. 

Flexible, robust digital money ecosystem

Under tokenized fund settlement, Hang Seng, in collaboration with Boston Consulting Group and Aptos Labs, validated the commercial potential of using digital money to settle tokenized funds on a public permissioned blockchain.

Surveys showed strong interest from Hong Kong and mainland Chinese investors in features enabled by digital money and tokenized funds. Findings underscored Hong Kong’s potential to advance as a leading international financial centre.

Both pilots explored private and public permissioned blockchain networks, highlighting the potential of interoperability in building a flexible, robust digital money ecosystem.

“As the only bank to conduct two pilots in Phase 2 of Project e-HKD+, we are proud to contribute to shaping the future of digital money in Hong Kong,” says Luanne Lim, executive director and chief executive of Hang Seng Bank. “Through our pilots in digital rewards and, notably, the first proof-of-concept of tokenized fund for Hang Seng, we demonstrated benefits such as improved efficiency and faster settlement.

“We look forward to working closely with regulators and partners to foster a secure and sustainable digital money ecosystem, enhancing Hong Kong’s position as an international financial centre.”