(Bloomberg) -- Hong Kong launched a pilot program enabling digital yuan payments through major Chinese banks, the first example of China’s currency project being deployed beyond the mainland.

Residents of the city can now open digital yuan wallets with Bank of China, Bank of Communications, China Construction Bank and Industrial and Commercial Bank of China to pay merchants in mainland China directly, Hong Kong’s de facto central bank said in a statement on Friday. 

The wallets can be set up using only a Hong Kong mobile phone number and can be used within the Greater Bay Area as well as other pilot regions. Users can top-up the wallets using the local instant payment system known as FPS.

“We will continue to work closely with the People’s Bank of China to gradually expand the application of e-CNY, enrich the range of functionalities” and promote the acceptance of the digital yuan by more retail merchants in both Hong Kong and China, said Eddie Yue, chief executive of the Hong Kong Monetary Authority in a statement. Hong Kong is the first place outside of mainland China in which residents can set up e-CNY wallets, according to the HKMA.

China has rolled out digital yuan wallets to about 260 million users since piloting e-CNY — another name for the digital yuan — in a few cities in 2020, according to the Atlantic Council. Challenges for uptake include the popularity of payments platforms like Alipay and WeChat Pay, as well as privacy concerns.

Authorities are pushing to enlarge the yuan’s share of the global payments market. Since last year, the total amount of payments settled in yuan rose almost 1.5 times from a low base, according to data tracked by Swift. 

Chinese tourists can also use the digital yuan wallets to make purchases in Hong Kong, Howard Lee, deputy chief executive of the HKMA said. Hong Kong-based wallet users are subject to annual cumulative payment limits of 50,000 yuan. 

The official launch of the digital yuan project in Hong Kong comes as the city tries to develop a virtual-asset hub, an initiative started in 2022 that features a licensing regime for crypto exchanges and the recent listing of exchange-traded funds investing directly in the Bitcoin and Ether tokens.

In 2023, China executed cross-border settlement in e-CNY for the first time in several commodities, according to a Bloomberg Intelligence note. PetroChina Co. bought one million barrels of crude using e-CNY in October, BI wrote. Bank of China facilitated the first settlement in iron ore for 24 million yuan ($3.3 million) and the first settlement in gold worth 100 million yuan in December.

BI said that China started to include e-CNY in its M0 money supply data from December 2022, with the People’s Bank of China reporting that e-CNY totaled 16.5 billion yuan at the end of June 2023, accounting for 0.16% of M0.

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