rCBDC in Hong Kong
- Acts as the digital version of Hong Kong dollar cash.
- Carries a lot of innovative potential.
- Visible advantage.
Benefits of using e-HKD
- Assist in preparing Hong Kong for the issues that alternative units of account (such as stablecoins) pose in Hong Kong.
- Enable innovative applications.
Potential challenges of e-HKD
- Cause the retail payment landscape become more competitive.
- Impact on banks’ funding when too many people convert their money from bank deposits to e-HKD.
- A certain level of traceability would be unavoidable.
How do Retail Central Bank Digital Currency (rCBDC) differ from the existing e-Payment methods?
- rCBDC works in the same way that physical coins and notes produced or backed by the central bank do.
- It is registered in the account of the central bank and hence has no credit risk.
- Hold central bank money in electronic form and use it to make payments.
Potential benefits brought by rCBDC
- Boost the availability and usability of central bank money, allowing it to be utilized in more situations than cash.
- Reducing the likelihood of alternative units of account becoming dominant.
- Greater flexibility and innovation in payments and payment-related digital services.
- With the use of e-HKD, it is free of credit and liquidity risks, resilient to network outage, merchant acceptance, anonymity, and universally accessible.
- Loosen the effective lower bound, allowing policy rates to fall more than they would otherwise.
Potential challenges brought by rCBDC
- Increasing cyber security and software risks.
- Power/network outages during extreme weather events increase the risks of economic vulnerability.
AutoML Capital is a Type 9 (Asset Management) and Type 4 (Advising on Securities) licensed corporation under the Hong Kong Securities and Futures Ordinance (“SFO”). AutoML Capital only provides investment advisory services to Professional Investors as defined under SFO. It does not provide such services to the public and nothing contained herein should be construed as an offer of such services.