China’s Digital Currency Electronic Payment (DCEP) project is gathering a lot of momentum as the actual realization seems more realistic with every passing event. Having executed a successful pilot program in Shenzhen, and working towards another test in Suzhou, discussions between Hong Kong and the People’s Bank of China (PBoC) on the trial of the proposed DCEP for cross-border payments has begun. 

A proposal for technical trial

The discussion, which is between PBOC’s Digital Currency Institute and the Hong Kong Monetary Authority (HKMA) is centred around a technical trial. This trial will involve using the DCEP for facilitating cross-border payments, while continuing to make other technical preparations.

In an official statement by the HKMA, its Chief Executive, Eddie Yue says;

The HKMA and the Digital Currency Institute of People’s Bank of China are discussing the technical pilot testing of using e-CNY, the digital renminbi issued by the PBOC, for making cross-border payments, and are making the corresponding technical preparations.

Yue also explains that implementing the DCEP for cross-border payment will offer even greater convenience to both Hong Kong and Mainland tourists. This is a process that he expects to be achieved without much complexity. Since the renminbi is already in use in Hong Kong, the status of the DCEP will not be any different from the existing cash that is in circulation.

While the local monetary systems in many parts of the world have become largely digitalized, Yue notes that cross-border payments are still confronted with the trivial challenges of times past. Long processing time, high transaction cost and low transparency are some of the major pain points for cross-border transactions all over the world. Geographical issues such as different time zones, and socio-political influences that deal with local economic policies and regulation are long term factors that have inhibited the achievement of more efficient cross-border payment systems.

Hong Kong is key to international finance

Hong Kong is a hub for international finance, hence, it is not surprising that the HKMA is making a lot of effort to find more efficient methods in the ecosystem of cross-border finance. “The HKMA has been proactive in building the local financial infrastructure so as to provide a multi-currency, multi-dimensional platform, says Yue.  “This will link up our payment systems with those of the neighbouring regions and international systems to facilitate faster and safer cross-border payment”.

Perhaps, the actualization of China’s DCEP project is coming at a suitable time for both regions, considering the efforts that have been put in place towards achieving an efficient finance ecosystem. Just like the local test and trial of the DCEP is opening up other opportunities for implementation, the cross-border trial being discussed by the PBoC and HKMA might be the first of many more that would follow.

The timetable of the actual launch of the DCEP is not known yet. However, with every step that is made by the Chinese government on the project, it is only normal to feel that the realization of the project is drawing near.