Thursday, March 7, 2024

Hong Kong launches Project Ensemble to support tokenization with wCBDC

 The HKMA’s latest CBDC project will look at tokenized deposits in tokenized asset transactions.

The Hong Kong Monetary Authority (HKMA) will launch a project to create a new wholesale central bank digital currency (wCBDC) to support tokenization. Dubbed Project Ensemble, it could result in the issuance of a “live” CBDC if there is sufficient interest, the HKMA said in an announcement.

The project will center around innovative infrastructure for interbank settlement using wCBDC. Its initial focus will be on tokenized deposits, that is, tokenized commercial bank money, for use in transactions with tokenized assets. The first step in the project will be the creation of a sandbox that will research and test:

“Tokenisation use cases that include, among others, settlement of tokenised real world assets (e.g. green bonds, carbon credits, aircraft, electric vehicle charging stations, electronic bills of lading and treasury management).”

The HKMA will also form a wCBDC Architecture Community that will consist of local and multinational banks, “key players,” and the HKMA’s CBDC Expert Group, which was formed in October and consists of 11 academics from a variety of fields and universities in Hong Kong. In addition, the HKMA will seek participation from other central banks and international organizations.

“We welcome global talents and industry players to come to Hong Kong and be part of this very exciting tokenisation journey,” HKMA chief executive said.

The announcement did not indicate any involvement by the Bank for International Settlements, although it mentioned the BIS projects the HKMA is already participating in, such as Projects mBridge, Dynamo and Genesis, and experiments it has conducted with local and Chinese banks. Those include tests conducted in conjunction with HSBC and Hang Seng that were conducted using the bank’s e-HKD “in house” CBDC. HSBC and Ant Group took part in another project that looked at the use of tokenized deposits to transfer funds within the HSBC network.

The HKMA released guidance in February on the sale and distribution of tokenized products that are not regulated by the Hong Kong Securities and Futures Commission. The latter body is currently considering a regulatory framework for stablecoins.

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