Bittime - Hong Kong is noted as the first city outside mainland China to allow its residents to open digital wallets containing e-CNY, or digital yuan. This marks a new step in efforts to make these Chinese digital assets globally known.
"This is not an ordinary digital wallet, but rather a wallet backed by the People's Bank of China," explained Howard Lee, Deputy Chief Executive of the Hong Kong Monetary Authority (HKMA), the city's de facto central bank. "The value of one e-CNY is equal to one yuan."
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Hong Kong Residents Can Open e-CNY Wallets Through Banks
Hong Kong residents can now open e-CNY wallets through China's four major state-owned banks - Bank of China, Bank of Communications, China Construction Bank, and Industrial and Commercial Bank of China - using their mobile phone numbers in Hong Kong.
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The service is also available to foreign nationals living in Hong Kong, as long as they have a valid local mobile phone, according to Kitty Lai, head of financial infrastructure development at the HKMA.
Main Use of e-CNY Digital Wallet Expected to Occur in Greater Bay
"We expect the primary use will be in the Greater Bay Area," Lee said.
The Greater Bay Area is an economic region that includes Hong Kong, Macau and nine cities in Guangdong province. Both the Chinese central government and Hong Kong authorities are aggressively promoting this concept to strengthen relations between the three regions.
Lee stressed that the move will give Hong Kong residents traveling to the territory "another safe and convenient option for cross-border payments."
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However, some in Hong Kong's retail sector are concerned that residents will prefer to go to cities in mainland China. For example, Shenzhen for eating and buying daily goods.
It is feared that this could reduce consumption in Hong Kong and have a negative impact on their business.
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Gary Ng, senior economist at French financial institution Natixis, told Nikkei Asia that the announcement was a "big step compared to before."
Ng said that allowing foreign residents or people outside mainland China to have greater access to such assets is another step to promote the yuan for international use.
"I think this is the direction they want to go," he said, predicting companies will use the system in the coming days.
Network of Merchants Accepting e-CNY Still Small
Currently, the network of merchants accepting e-CNY in Hong Kong is still relatively small, around 300. Individual e-CNY wallets in the city have a balance limit of 10,000 yuan (around Rp. 22 million), a single transaction limit of 2,000 yuan (around Rp. 4 .4 million), and an annual limit of 50,000 yuan (around Rp. 110 million).
Users can top up their e-CNY wallets through the Faster Payment System (FPS), an electronic payment infrastructure created by the HKMA and supported by 17 retail banks in the city. This marks the first time FPS has been integrated with this digital asset system.
Eleven of the banks also support instant conversion between Hong Kong dollars and yuan.
ZA, one of eight virtual banks in the city backed by mainland Chinese insurer ZhongAn Online P&C Insurance, is among the institutions offering e-CNY wallet top-up services via FPS.
Expansion of e-CNY One of the Digital Asset Promotions
The expansion of the e-CNY program in Hong Kong is one of six measures announced by the People's Bank of China (PBOC) earlier this year. This falls under their “three connections, three facilitation” initiative to enhance financial cooperation and promote the use of digital assets.
Hong Kong has been at the forefront of efforts to promote the yuan for international use. Eddie Yue, chief executive of the HKMA, said in January that the move was welcome.
Furthermore, the move "strengthens Hong Kong's status as an international financial center and offshore RMB business center," which refers to the renminbi, another term for the yuan.
Previously, only certain bank staff and selected customers in Hong Kong could participate in the trial of the e-CNY system. Now, any resident with a Hong Kong phone number can open an account.
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Please note that from 2022, the Hong Kong government requires all telephone cards to be registered in real names.
The e-CNY system has been trialled in 17 other provinces and cities in mainland China since 2019 and now supports payments at more than 10 million brick-and-mortar merchants as well as some online stores.
Previously, Chinese authorities only allowed non-mainland residents to open digital yuan accounts in a limited way, as was the case with Asian Games participants in Hangzhou last fall.
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