Visa Completes Pilot Test of CBDC in Hong Kong

Visa, in collaboration with HSBC and Hang Seng Bank, has successfully completed a pilot test in Hong Kong to study tokenized deposits using central bank digital currencies (CBDCs).

The pilot program, part of the “Digital Hong Kong Dollar” initiative organized by the Hong Kong Monetary Authority (HKMA), aimed to explore the potential of this technology in interbank business-to-business (B2B) payments, according to a Wednesday (Nov. 1) press release issued by Visa and translated by Google.

The pilot test simulated two use cases: property payments and settlements between payment institutions and merchants, according to the release. It showcased the advantages of B2B payment tokenization, including faster payment speed, improved settlement risk management and control, enhanced payment network resilience, and increased transaction transparency.

Tokenization technology has gained significant attention in the financial industry and has the potential to revolutionize the way banks and digital assets communicate, the release said. Visa plans to further explore feasible tokenized deposit use cases, such as asset market tokenization, programmable finance, expanded retail solutions, and cross-border payments.

Liang Puning, managing director of Visa Hong Kong and Macau, said in the release that the pilot program allowed Visa to leverage its strengths and drive payment innovation, ultimately benefiting citizens, businesses and markets in Hong Kong.

The pilot test results demonstrated that tokenized deposits can provide additional payment options for large or time-sensitive transactions, such as property payments, according to the press release. This technology ensures secure transactions and may even reduce settlement risks.

Additionally, using tokenized deposits for settlement processes between payment card payees and merchants could present an innovative approach to conducting B2B payments, offering increased transaction transparency and faster settlement of large transactions, the release said.

Nischint Sanghavi, head of Digital Currency Business Unit, Asia Pacific at Visa, highlighted the potential benefits of implementing a central bank digital currency. These benefits include faster settlements, a seamless payment experience for large-value transactions, greater transaction transparency and the advantages brought by a 24/7 online payment infrastructure.

Another recent Visa-led pilot prototyped Brazil’s blockchain-based CBDC, the Real Digital, which might enable innovative programmatic cross-border payments for farmers as part of the Brazilian central bank’s LIFT Challenge.