China Accelerates Digital Yuan Testing in Hong Kong

Hong Kong authorities have started negotiating with China to expand and deepen cross-border digital yuan testing.

May 13, 2021, | AtoZ Markets – Hong Kong Monetary Authority (HKMA) is preparing for the second phase of digital yuan testing, Bloomberg reports this with reference to the local central bank. The HKMA are planning to expand and deepen the use of the digital yuan for cross-border payments.

We have tested the use of synced applications, system connectivity and certain use cases such as international purchases,” the Authority told Bloomberg.

The first phase of testing was attended by the Central Bank of Hong Kong, the Digital Currency Institute of the People's Bank of China, as well as business representatives. However, the test results were not disclosed.

Related: China Wants to Test Digital Yuan at Winter Olympics
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The digital renminbi could speed up and reduce the cost of processing cross-border payments and clearing in Hong Kong, consulting firm Oliver Wyman discovered . For example, the company estimates that cross-border payments in the city range from $20 billion to $40 billion annually. This is equivalent to 11% of the city's gross domestic product for 2020.

China is actively testing the digital yuan after the Hong Kong security law passed in 2020, which limited the region's autonomy. Moreover, this spring, China changed its electoral legislation in Hong Kong, cutting back the opposition's options.

According to The Wall Street Journal, China can use blockchain technology as a weapon in the fight for the Internet.

Meanwhile, the Hong Kong regulator intends to tighten the regulation of the cryptocurrency market. As the local newspaper South China Morning Post found out, the regional government intends to introduce a ban on digital currencies at the end of 2021.

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