Visa, HSBC, and Hang Seng Bank have successfully completed phase 1 of a digital currency trial in Hong Kong, bringing the city one step closer to launching a central bank digital currency (CBDC). In the trial, Visa achieved “near real-time” finality with transfers involving tokenized deposits of the digital Hong Kong dollar (e-HKD). The tokenized deposits were burned on the sending bank’s ledger, minted on the receiving bank’s ledger, and settled interbank via the simulated wholesale CBDC layer. This process streamlined operational dependencies and improved liquidity management.
Visa’s digital HK dollar test pilot was also functional 24/7, surpassing the uptime of traditional financial systems. The company emphasized that tokenized deposits can be fully transacted while remaining encrypted, ensuring the privacy of non-bank users’ information. Visa’s next steps include exploring the use of e-HKD in tokenized asset markets and programmable finance for automating real estate transactions. They are also interested in expanding retail solutions and digital cross-border payments.
Despite these successful results, there are still issues that need to be resolved before the full launch of the Hong Kong digital dollar can happen. The Hong Kong Monetary Authority warned that an rCBDC issued as programmable money may be more susceptible to cybersecurity risks. However, with the support of Beijing’s central government, Hong Kong has been striving to become a Web3 hub for blockchain in the Asia-Pacific region.
In other news, Hashkey, one of the first crypto exchanges to receive a regulatory license in Hong Kong, has announced plans to introduce an exchange token called “HashKey EcoPoints” (HSK) in 2024. The HSK token will be minted on Ethereum with a total supply of 1 billion. The token will not be sold for fundraising purposes but will be distributed as incentives to ecosystem users and distributors. It can be used to settle trading fees and gain early access to future token subscriptions and product upgrades. Hashkey also plans to buy back HSK tokens with a portion of the profits generated from related Hashkey services.
Moving on, nineteen Chinese nationals have been sentenced for their involvement in a $308 million money-laundering scheme using cryptocurrencies. Mr. Jiang and Mr. Deng, the principal conductors of the scheme, laundered a total of $308 million worth of Bitcoin and Tether for proceeds of crime related to online gambling and wire fraud. To avoid platform monitoring and Know Your Customer requirements, the accused individuals used peer-to-peer transactions and manipulated prices relative to spot markets. They then transferred the coins to exchanges for cash. These individuals were sentenced to prison terms ranging from six months to six years.
This rise in wire fraud involving cryptocurrencies has led China’s Central Government to crack down on crypto-related activities in the country. However, foreign investors using Chinese-based crypto services without criminal intent have sometimes been affected by these enforcement actions.
Overall, these developments highlight Hong Kong’s progress in digital currency trials, the future plans of crypto exchange Hashkey, and the ongoing challenges with crypto-related crimes in China.