Hong Kong has taken a significant step in digital currency adoption by becoming the first region outside of mainland China to allow users to open e-CNY wallets. The Hong Kong Monetary Authority (HKMA) announced that both permanent residents and foreign nationals living in Hong Kong can now open these wallets using their local mobile phone numbers, with the support of four major mainland Chinese state-owned banks: Bank of China, Bank of Communications, China Construction Bank, and Industrial & Commercial Bank of China.
Unlike traditional digital wallets, the e-CNY wallet has the full endorsement of the People’s Bank of China. Howard Lee, the Deputy Chief Executive of HKMA, emphasized that the main objective of the digital yuan is to provide Hong Kong residents with a safe and convenient option for cross-border payments, particularly when traveling to the Greater Bay Area integration zone, which includes Hong Kong, Macao, and nine cities in Guangdong province.
It is worth noting that Hong Kong retailers have expressed concerns about the new system. They believe that there is more demand for mobile payments in mainland cities like Shenzhen, which may divert consumption away from Hong Kong. Currently, around 300 merchants in Hong Kong accept e-CNY payments, subject to certain limits. Individual wallet balances are capped at ¥10,000 ($1,380), single transactions are limited to ¥2,000, and annual spending is restricted to ¥50,000.
Hong Kong residents can top up their wallets using Hong Kong’s Faster Payment System (FPS), which has been integrated with the e-CNY payment infrastructure. Senior economist Gary Ng expects more companies to adopt the system in the future, describing it as a significant move towards the internationalization of the yuan.
The digital yuan has seen tremendous growth in mainland China, with domestic transactions reaching 1.8 trillion yuan (approximately $249 billion) by the end of June 2023. This growth can be attributed to the opening of over 120 million individual e-CNY digital wallets nationwide, including over 29 million in Suzhou. However, despite this progress, many workers still prefer to convert their e-CNY into physical cash due to concerns about its utility and privacy.
Overall, the introduction of e-CNY wallets in Hong Kong marks a significant milestone in the adoption of digital currencies and signals a growing trend towards digital payments in the region.
