What: Hong Kong is now authorized to use digital yuan.

Why it is important: While digital yuan is not yet overly popular worldwide, this will be probably a much needed option for retailers willing to lure in Mainland customers.

Hong Kong is set to integrate mainland China's pilot digital currency, the e-CNY, into its retail environment, as announced by the city's central bank head. This development marks a significant step in Beijing's agenda to internationalize the yuan, especially during a time of escalating geopolitical tensions. The integration allows both mainland Chinese and Hong Kong residents to utilize digital yuan wallets for payments in Hong Kong’s retail shops and selected online stores, without the need to establish a mainland bank account.

The e-CNY, primarily used for domestic transactions within China, has reached a transaction volume of US$249.27 billion by the end of June 2023, with over 120 million digital wallets in operation. The digital currency is already accepted by over 10 million merchants across 17 provinces and cities in mainland China. In Hong Kong, the digital wallets will have a balance limit of $1,384, with transaction and daily payment caps set at $276.87 and $692.17 respectively. Peer-to-peer transfers, however, are currently prohibited.

This pilot program in Hong Kong will facilitate more straightforward transactions for residents traveling or conducting business between the mainland and Hong Kong. Major Chinese banks like the Industrial and Commercial Bank of China, Bank of China Ltd, China Construction Bank Corp, and Bank of Communications Co are among the designated e-CNY wallet operators. Despite these advancements, the yuan's role in global finance remains relatively minor but is gradually increasing.

Hong Kong retailers to be allowed to accept new digital yuan