and we're back we're back back to after a short break but I'm sure it was a very meaningful break and you are excited and ready to hear from our next speakers because they are going to tell us about the retail cbdc in Hong Kong which are the lessons that we learned from the HKD pilot program I would like to introduce our moderator first George Shia Chief finance officer fintech facilitation officer at Hong Kong monetary Authority in conversation with Gilbert Lee head of strategy and corporate development and chief of staff at Hansen Bank asak vantes excuse my pronunciation if it's not perfect apaac head of digital assets and blockchain at MasterCard Monita long she is the chief executive officer digital ventor at hkt nishin shavi head of digital currencies asia-pacific at visa and Flora L executive general manager at head of retail Banking and wealth management and ICBC Asia please welcome them on stage [Music] thank you thank you ladies and gentlemen good afternoon first of all a warm welcome to all of you to attend ATT this uh Hong Kong fin Tech week 2023 and this panel discussion about uh eskd very excited to have our five honorable guests uh on the stage here with me today in this session to start um I think the hkma um uh has always value public and private collaboration which is why we invited our industry Partners to join the HK retail cbdc Journey um as well as you know uh uh to to to examine the use case the implementation and design issues about eskd so I would like to once again thanks uh the industry participants to their support and um your tiess contribution thank you so much so following the commencement of the iskd pilot program in May this year 16 selected firms from the financial payment as well as tech technology sectors conducted 14 uh pilot test cases under the Phase One Pilot program taking deep dives into some potential domestic and Retail uh use cases and across six different categories so phase one of the E Hong Kong dollar pilot program was completed recently and the hkma in fact has just issued a report four days ago uh to to to uh discuss our uh overall assessment as well as the way forward so these pilot showed that the HKD may add some unique values to the HKD and the payment ecosystem in Hong Kong which are programmability tokenization and atomic settlement so I think it's time to let me hand over the stage to our honorable guests to the so I just mentioned programmability is one of the key areas observed where where uh HKD can add value to so Gilbert and asok may I tap your view um as the pilot uh you you you were involved um actually uh use the programmability uh as a as a key components so could you share your views on how programmability can shape the future of uh of of payments maybe I will hand over to Gilbert first of course thank you Gilbert thank you George thank you uh thank you everyone um I was in a rush to this panel and I actually haven't had lunch yet and I and I didn't have breakfast um and and then I feel very hungry but um and and my second she knows about that and she acted as always uh very much like a parent and gave me a lecture on this is very bad for your health this is going to affect your performance on stage blah blah blah blah blah and then she handed me a $100 note and ordered me to buy a sandwich and buy a cup of coffee buy a sandwich and buy a cup of coffee obviously I didn't do that otherwise you wouldn't see this $100 notes anymore um but I'm going to further upset her because I actually plan to use this $100 notes um with my other money of course to buy a glass of shon after this p uh and of course I will invite George and every one of you to to go with me and this will really upset my secretary um but the reason why I would upset her is that because she cannot program this $100 notes she has no control on how I will spend it and when I will spend it imagine if if she can program this $100 notes and say you can only buy sandwich before 2: p.m. otherwise it will disappear go back to my uh to my wallet um she would not feel upset and I will therefore definitely buy that particular sandwich and that is exactly what Hangin bank has tested in our pilot programs um so in our pilot programs we have actually created a private blockchain for token insurance and number two we have a hypothetical HD wallet to facilitate and manage the tokens so the two use cases we produced are number one Merchant um reward program and number two uh government grant dispersement for Merchant reward program um Merchant can give away incentive mthly like $100 Hong Kong uh again um to potential customers and the potential customers uh can only buy a coffee not alcohol not soft dring not juice at that particular Outlet uh the particular coffee shop not at a wine bar not at a convenience store and they have to spend that incentive money this week not next week not not next year so all these can be programmed into that uh hypothetical eskd money so office benefits to the mer mergence is very easy just a few clicks away they can uh issue the the the the the incentive money they do not need to print they do not need to disseminate uh users are very similar they have that the uh voucher on their wallet they do not need to carry the physical paper they do not need to read the terms and condition which will help digitize as a payments similarly the Second Use case is government fund dispersement so now the government and public organ organization can send subsidies money to a certain industry for example they can choose which industry technology industry for example but not oil and gas not tobacco they can choose where uh for example only for companies in the cyberport not those in rch essential or they can also uh destinate the usage for salary payment only uh the owners can't use the subsidies to trade in a stock market for example so obious benefits again uh we can uh mitigate the risk of misuse and fent use we can the government can very easily trace the effectiveness of the subsidies where they go where they are being used etc etc so hang has completed in September and October these uh experiments um we have involved over 150 individuals seven Merchants a public organization and over 500 transactions including our long-term partner sort and CK um 80% of the individuals are satisfied with the experience and they agree that programmability is the unique and distinguished features of eh KD all of the merchant find eh KD beneficial to their business and they will uh is they believe HKD will digitize the uh payment collection processes so uh hang bank believ that programmability will drive Innovation and expedite the development of digital economy George thank you gber thank you for your sharing could someone please just prepare a sish and a cup of coffee and a back right after the panel it's on me okay thank you Josh use HK yeah I I'll buy now pay later using uh electronic money thank how about you uh as what do you think how C programmability help to uh you know shape our future payments over to you thank you uh Gilbert if your uh admin's giving out $100 is great I'm going to come work for you too so but uh you know where we kind of see it is that uh programmability is really important uh as a as a form of trust for uh for this new digital world uh you know if you think about it like you can actually use programability to wrap regulations around these tokens you can use programmability for the bank to ensure autom of some of these flows that you don't have to have so many manual touch points and finally for the for the customer uh the customer can have an uh guarantees that the items that they ordered online or digitally is what they're going to receive so programmability kind of kind of helps out across the board you know the The Regulators the banks the individual U and that's that's what we feel is very important now we tested that that out in our project that we did for uh for the HKD pilot where uh we had a merchant buy uh a luxury watch from an unknown source now you know uh you know I I live in Asia there's a lot of uh gry Market Rolexes flying around these days tough to get one uh so if you don't have that trust with the with the counterparty of where you're actually getting the The Goods the the programmability aspect you're able to use that to guarantee that the Rolex that the that the merchant ordered is actually truly a Rolex and we we tested that with with an nft which has an nft certificate to guarantee the authenticity of the actual good right and then once everybody was satisfied but the actual good was true and stated what it was then only was the payment uh made to the uh between the buyer and seller right now for us um you know even though we tested it this with EHD the the underlying asset could be anything it could be uh EHD it could be stable coin it could be tokenized deposits any of those could be could be used ac across our platform to showcase the strength of programmability thank you thank you so much thank you for your sharing so definitely tokenization is uh another key area that HKD could uh add value to so Monica I know you are an advocate for tokenization right especially in the space of uh web three so Hong Kong te's pilot actually involved the uh DVP settlement between HKD and uh real estate token so with a common goal to develop Hong Kong as a as a web three Hub uh uh how how do you see that um uh USD uh uh could help to to uh develop this area and what's the challenge that you foresee over to you all right oh um before I get into that exact organization I would like to set the backdrop so that um everybody knows what we're doing uh I think our project is quite different from the others CU we CU We Believe at hkt and our Consulting partner is that uh to Foster the adoptions of digital currencies requires a collective effort from various partsy into society in order to create the biggest values to the uh to the economy as a whole therefore we put together a a Consortium approach where our intentions is to invite relevant members of different subject matter expertise uh to make this uh a pilot use case for us now the use case that we put forward is is really about you tokenize property backed secure lending with ring fans usage but it sounds very complicated but I guess say I think I can rephrase it in layman terms is like um a layment can actually tokenize their their property their apartments and use a fractions of their tokenized exits for collaterals to apply a secure lending so that they can also set the the the purpose for the loan and for the bank but they disperse the money to this customer they can actually ring fans to usage and in this case the bank is able to better control and access the credits weeks of these individual customers and to offer a more competitive financing rate and returns is bringing benefits to the consumers uh but I but I think uh everybody would think oh is a crazy idea because imagines you know all the legacies with the land registry and and we all know how the government handled the physical Deeds it sounds very remote but you think if you are adopting a new technology uh the DLT the distribute larger Technologies all these if we come with smart uh smart contract which can enforce uh automatic fulfillment of preset condition and all these can be done uh effectively uh efficiently and in a very short period of time but but I think the point I I want to raise to highlight here is is having all this infrastructure is the power to unleash the liquidity in the market now uh um at present I uh based on some research uh the total accet that is available for tokenization is amount to 37 trillion and actually 20% goes to residential okay but the finance home properties ratio versus the total values of properties is only 9% so imagine if you can provide if we can provide a Innovative solution for secure Landing is is able to facilitate the general Mass to unleash the liquidity more easily and ultimately it can help the growth of uh economic growth of Hong Kong and it's also able to connect us to the virtual assets uh of the webst stre economy so to speak uh uh with a set of tokens on the public blockchains and make onramp off-ramp processing easier so this is a thing that probably a lot of us will think very remote but I would say it would happen faster than I expected so this is the kind of uh initiative that we want to bring to the market but again there is a lot of challenge as you said there's a lot of challenge in uh to make it practical I I think the first challenge is um now all digital Transformations come with the key problem is to how to work with the Legacy systems but I guess this problem is is a matter of how to justify investment how to balance between the technology debt and sustainabilities and and the Second Challenge would be uh the the concerns on Cyber Securities and and and and and data privacies but that's what it call fors you know George in forming a well structured legal and uh regulatory framework so that uh uh to safeguard the benefits of all the stakeholders including the consumer the Enterprise and the bank but I think uh uh all these uh come with a conclusion that uh as as we have as the government has been repeatedly reinforced that it is too early to sort of conclude whether to launch e Hong Kong dollar but I would highlight that uh uh uh uh while we consider to launch eh Hong Kong dollar uh we need to take into considerations the various type of digital currencies uh say for example stable coin and tokenized access and I'm think uh Visa ICBC will talk about it um so we are very proud to participate in this project and we see a lot of opportunities to uh bring Hong Kong to a next level of success thank you Monica thank you for your sharing and support to the initiative I particularly like your point that um because I think technology is just evolving too fast so I think now a day nobody can just you know do any everything by by themselves so um collaboration is the key to the success thank you so much so nin tokenized deposit is a very topic nowaday you know so how do you see the combination of tokenized deposits and wholesale uh eh KD uh could transform the payment uh ecosystem could you share uh your your mind with us sure definitely I think thanks uh I think tokenized deposit has become a very Hot Topic at this point uh while it's still very early stage but I think the project that we did uh we did with our partners hang bank and HSBC this was focused on exploring the potential of tokenized deposit in different use cases uh and our Focus was on B2B use cases to test the interoperability and atomicity of uh these payments so in terms of the use cases that we focused on the first use case was a property use case uh again a more simplified version of what Monica was talking about where we looking at a property buyer buying a property from a developer directly and uh it's a large high value trans which involves a lot of transfers and we're trying to see how tokiz deposits can be used to make these transfers much more seamless the Second Use case focused on an acquirer to Merchant settlement So within that today there are certain issues in terms of how the business processes work and how fast Merchants get the payment so we wanted to explore how uh tokenized deposit can also be used with an EHD to provide Merchants faster access uh and eventually reduce their Capital requirements so why while we're doing this the kind of benefits we've seen so far in this pilot right one of them is getting the settlement finality and reduced risk of settlement so by using smart contracts on a blockchain uh with an EHD simulated we figured that there is a way to reduce uh the settlement Risk by having atomicity so at the same time when the transfers are happening between the two parties the banks also able to achieve an atomic settlement uh so again while this is at a Pilot stage in the sandbox environment it can still uh help to kind of reduce the settlement risk uh reduce the risk of collaterals uh and improve the working capital requirements uh another area we've seen which can work very well is uh improved transparency so here each party can actually go to the blockchain see the success and failure of the transaction now while there is transparency on one side there is obviously the need for priv you know the privacy of the transactions so this platform that we have built also allows Banks to preserve their privacy where users can only see the success and failure of the transactions but not the details so that way each bank which is obviously very very concerned about their own privacy is able to safeguard their information uh in their own blockchain blockchain is is a 247 365 always on infrastructure so by using blockchain in this we also designed that platform to become an always on infrastructure and that again provides benefits in terms of you know especially for these high value transfer where people can use it on weekends uh throughout you know different time zones and these are the things we've tested also where we were able to do different Property Transfers different payment transfers at uh different times uh in the in the frame programmability I think is one thing that you guys also discussed earlier right so that's something uh again through the use of smart contracts we can see how these large value purchases can be automated can be made into uh you know faster settlement processes again within that right so it's again it'll depend on how the banks are able to look at their customer base see what their customers want and you know adapt that programmability aspect on these platforms that we're looking at uh I think to close off I think uh can just say that this is first step of many right like while this is a very hot topic people always talking about it uh it's still very early we are very early stage I would say we are still at the ground level or first level and we do hope to continue to work on these projects with our partners uh and also with the support of hkma and we're thankful for hkma for this participation in the pilot and we hope to continue the work uh in the future as well thank you so much certainly I think this is a still a long way to go but I think we all do see that is there are many potentials benefits in it so um we we all need to Deep dive to see um uh uh how how many useful especially we need to find uh uh and investigate some useful use case in know in order to unlock all the benefits so thank you very much uh so Flora the last question would be for you so uh both visas toonize uh deposit use case and also ICBC offline uh uh Payment Solutions uh showcase the settlement uh efficiency of an eskd so but could you um uh share with us how can offline Payment Solutions uh benefit the general public in um cashless payment in Hong Kong in the long term okay thank you George um first of all I think for us in ICBC um we adopt a very simple we deliberately choose to introduce a very simple um e Hong Kong dollar physical card but with a new feature is a new medium um here it is I can show you so it's like uh it's just like a card but then it's um simultaneously we have the balance and the transaction display on the service of the card so I think this approach is um we've strong bit strongly believe that it's a very easily and quickest way for the public to adopt in terms of the E Hong Kong concept so um and we're very happy to learn that during our pilot test 95% of our participants like merchants or consumers are highly satisfied with the setup an efficiency that is all the transactions can be completed within 0.2 seconds Which is less than a wink of an eye so um in the long run I think we want to benefit the majority of the general public where we were focused on highly cash concentrated scenarios so you can think about that namely will be wet m markets taxes and also some of the charitable donations that you make at churches or so on so um from our study I think consumers on one hand can benefit from it because it's a no-brainer to use the card you know um inside with which is a e dollar and then even the senior citizens or children can use this it's um very easy and very convenient and on the other hand I think the merchants uh would also be uh even easier to set up because um if it's they only need to install an app rather than a machine they save all the costs to handle the cash and more so I think the settlement effect efficiency meaning that they can receive the payment in less than a second into their account is a is a big plus to them so on ourside we are also providing a lot of value added um transactions data historical data for their analysis which is also meant to uh in uplift a customer experience for example we're talking to some taxi drivers from the IND indry and they are really excited and welcome this initiative because it's um is a it's a Swift and um they can receive the money instantly and U they need they don't need to go through the hassle anymore with the banks or with count of branches and they also gave us a lot of um invaluable suggestions as to how to integrate into the taxi meters you know um getting the payment from other cbdc wallets like ecy or so on and more more so I think the security man measures that we're looking at can be enhanced so all in all I think um we are very positive and confident that with the he Hong Kong dollar PA test we we hope to align with more Partners to uh find out more use cases and um meant we are you know Keen to introduce a brand new experience for our customers to bridge the gap basically from a different perspective and hopefully that's will be um uh quite a good substitute to physical cash in the transition and near future thank you okay so yeah all the example that you just mentioned are all very practical use case but I think in addition to uh technical consideration we also need to you know kind of U uh do a lot more research and preparation for uh in terms of other areas such as policy regulations um and also legal Etc so as I said it's a long long journey okay so so to uh to to conclude um while the hkma has not yet uh made the decision on whether or when to introduce an HKD but we will remain uh open mind in considering all the well relevant issues uh uh uh relation to HKD carefully taking into considerations of the industry as well as uh Academia feedback and also of course we need to closely monitor the developments of the uh uh other jurisdiction Etc so um to conclude again the the hkma intends to commence uh phase two of the HK pilot program uh next year so we will build on the success of phase one and consider exploring some new use cases as well as a deep diver into some select uh use case from uh phase one we will also carry on uh our our foundation work in terms of the legal and uh technology Parts um uh uh to to make ourself more prepared for the uh uh potential implementations of HKD under the rail one of the hkma free ra approach I guess some of you may have may may have heard about this uh in Paving the way for the possible implementation of eskd in uh in the future so I think the HKD pilot program is a strong Testament to uh you know to the power of public private collaboration uh we we are confident that uh if we work together hand inand cohesively um I think the outcomes and insights gained from each pilot will would help to enrich our uh uh uh perspective as well as refine our approach for the future possible implementation of eh KD so once again thanks for our five honorable guest today and for the rest of you I wish you have uh enjoyed the rest of of the fintech week and of also of course have a happy Friday and coming uh uh have a great weekend ahead thank you very much thank [Applause] you thank you to our speakers for the amazing sharing as we do