Exclusive | Hong Kong’s ‘cutting-edge’ central bank digital currency pilot burnishes blockchain credentials, boosts international financial hub status, HKMA’s Yue says

Central banks around the world have been pivoting towards innovating future types of money on digital networks, aligning with the “unified ledger” vision that the Bank for International Settlements (BIS) outlined last June.

A unified ledger combines central bank and commercial bank money with other assets in common digital infrastructures, making it possible to instantly pay, clear and settle any transaction through tokenisation, smart contracts and programmability.

A wCBDC will be at the core of such a system, as the central bank money used for interbank settlement will provide confidence and added functionalities enabled by tokenisation.

HKMA launches wholesale CBDC pilot aimed at creating digital financial ecosystem

Agustin Carstens, BIS’s general manager, said he is “heartened” to see the HKMA’s new wCBDC project “supporting the development [of] its tokenisation market”.

The initiative under way appears to “align well with the vision of a unified ledger where a wholesale CBDC lies at the heart of the system, complemented by tokenised deposits from the regulated banking system”, Carstens said in an emailed statement to the Post.

On Thursday, the HKMA unveiled its wCBDC plan, dubbed “Project Ensemble”. In this plan, the HKMA will test an ecosystem that includes tokenised deposits, financial products and real-world assets using distributed ledger technology, and central bank money for settlement purposes.

Agustin Carstens, BIS’s general manager. Photo: Dickson Lee

The de facto central bank will set up a so-called sandbox to provide a closed loop for a select group of participants to test their innovations – from concepts to trading and settlement. The sandbox is expected to kick off formally by June.

It will also form an “architecture community” to develop common standards.

Some banks, technology firms and digital-asset stakeholders have announced their participation in the project. These include Hashkey Group, one of the first licensed cryptocurrency exchanges in Hong Kong, HSBC and its subsidiary, Hang Seng Bank, and Standard Chartered.

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More companies such as Microsoft and Ant Group’s Digital Technologies unit will join the community, according to sources familiar with the matter, who requested anonymity.

The latest project follows the HKMA’s other initiatives last year, such as testing a retail CBDC, the e-HKD, and a consultation paper on stablecoins.

“[The HKMA,] the BIS and most central banks see tokenisation as a good part of the future financial market,” Yue said. “The earlier you get there, provide the infrastructure and environment for institutions to issue tokenised bonds, funds, or real-world assets, [the faster] they will come to you.”


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Last November, the Bank of Korea rolled out a pilot programme for its retail CBDC that allowed 100,000 selected South Korean citizens to use deposit tokens to buy goods. In recent years, the Reserve Bank of India has also introduced the concept of an e-rupee.

“Asia is at the forefront of CBDC work, given its high degree of digitisation and vibrant fintech ecosystem, including in the payments area,” Carstens said. The progress has been built on “better understanding of how technological advances can be harnessed to build a more efficient, transparent and inclusive financial system that benefits society and people”, he added.

The HKMA envisages a few use cases in its wCBDC project, which are expected to address some pain points in the current market, where investment options are limited, transaction costs and service fees are high and settlement processes are lengthy.

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Yue said the Hong Kong government will issue more tokenised bonds, which might, in the future, go through the blockchain platform. He added that the settlement cycle has already decreased from five days for previous issuances to one day.

Following the trial run of the e-HKD last May, the HKMA plans to roll out a second phase to look into more “compelling” use cases, with focus on programmability, atomic settlement and tokenisation, Yue said.

On the “mBridge” multi-country CBDC project, the HKMA is actively working with the People’s Bank of China and the central banks of Thailand and the United Arab Emirates to prepare for the launch of a viable product.

These moves enhance “the international status of Hong Kong”, and put the city “on the most progressive front to show that we are on top of global trends”, Yue said.

“That’s quite important at this juncture, to tell the Hong Kong story.”

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