HKMA, BoT enter fintech collaboration, hint at joint central bank digital currency project

The central banking authorities of Hong Kong and Thailand are teaming up to promote financial innovation and undertake joint research projects, including one focused on central bank digital currency (CBDC).

On May 12, the Hong Kong Monetary Authority (HKMA) signed a Memorandum of Understanding (MoU) with the Bank of Thailand (BOT).

Under the MoU, the HKMA and BOT would collaborate on a number of areas including referral of innovative businesses, information and experience sharing, and joint innovation projects.

“The signing of this MoU not only demonstrates our mutual interests in developing collaborative fintech initiatives, but also underlines our on-going efforts in cross-border collaboration between central banks in promoting innovation and enhancing experience sharing. The HKMA looks forward to working together with BOT and seeing the positive outcome from our joint effort,” Norman Chan, Chief Executive of the HKMA, said in a statement.

The press release said that the two authorities could collaborate on a joint research project on CBDC, which could see them applying the knowledge and experience gained from their respective CBDC research studies.

The HKMA pursued its CBDC research under “Project LionRock1.” In a speech last September, Chan said that the central bank was studying the technical feasibility and merit of CBDC, adding:

“It is still early days, but it seems CBDC offers greater potential in wholesale than the retail area in terms of payment and settlement, especially in the cross-border context.

“However, considerably more research work is needed to analyse the relative merit of CBDC over the existing electronic or digital forms of payment in which central bank funds are used, cleared and settled centrally. It is also necessary to assess the likely impact CBDC has on the monetary policy transmission mechanism.”

The BoT, on the other hand, embarked on its CBDC project last year under Project Inthanon. Earlier this year, it announced the results of the project’s first phase focused on domestic wholesale fund transfer using wholesale CBDC.

“The results of Project Inthanon Phase I indicated that DLT can fulfil basic payment functionalities,” the BOT said, adding that the technology “demonstrated capabilities to help enhance payment efficiency and to support interbank transfer and settlement during off-hours.”