Hong Kong’s de facto central bank is developing a prototype digital currency.

The disclosure came in a Hong Kong legislative document published by the Legislative Council Panel on Financial Affair this week and dated 18th April.

According to the note, the Hong Kong Monetary Authority (HKMA), which acts as the region’s central bank and finance regulator, is working with Hong Kong Interbank Clearing Limited (a clearinghouse in which it has an ownership stake), several undisclosed banks and distributed ledger startup R3 on the initiative.

The document explained:

“The first phase of the research, which explores the feasibility of [central bank-issued digital currency] in performing domestic inter-bank payments, inter-corporate payment in the wholesale market and delivery versus payment (DvP) debt securities settlement, is expected to be completed in the fourth quarter of this year. Subject to the findings of the first phase, HKMA will map out the next steps.”

That the HKMA would pursue this line of inquiry is perhaps unsurprising. A growing number of central banks worldwide, including those from Canada, Singapore and the UK, have launched similar initiatives in recent months. The HKMA recently revealed that it had completed a trade finance project alongside a group of banks and R3.

The HKMA is expected to complete the proof-of-concept by the end of this year, after which further steps may be taken toward developing the digital currency project.

The institution is also planning to publish more of its internal research in the months ahead, with a new white paper expected to be released next quarter.

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