Hong Kong’s Bank of East Asia (BEA) recently conducted a proof of concept (PoC) involving issuing stablecoins using the Universal Digital Payments Network (UDPN). It tested both the issuance and redemption of stablecoins (minting and burning) and trialed a mobile application for clients.
Today most stablecoin usage happens in the cryptocurrency world or jurisdictions where consumers are keen to access dollars. One reason stablecoins haven’t gone mainstream is because of missing pieces of infrastructure. However, that is changing, meaning stablecoins will become increasingly competitive with bank payments, especially cross border. Banks are not standing by. They’re engaging in multi-bank tokenized deposit trials and issuing their own tokenized deposits or stablecoins.
The UDPN is a multi-faceted project supporting the issuance of stablecoins and tokenized deposits, as well as providing an interoperability layer between different digital currencies, including central bank digital currencies (CBDCs).
“Through our PoC with UDPN, we gained insights into global practices on Central Bank Digital Currencies (CBDCs) and the mechanism of stablecoins,” said the BEA’s Stephen Leung, Group CIO, General Manager and Head of Technology and Productivity Division.
“Experiments were conducted on the issuance of stablecoins, as well as the transfer and swapping between CBDCs and stablecoins. Cross-chain interoperability was also examined between stablecoins and digital currencies on different blockchains. This has laid (an) important foundation for any partnership opportunities that may arise in the future.”
Earlier this year the bank took part in a DLT repo transaction with HSBC involving digital green bonds issued by Hong Kong.
The UDPN was founded by Red Date Technology, the co-founder of China’s Blockchain-based Service Network (BSN) and the international BSN Spartan Network. Its development partner is the GFT consultancy. Earlier this year it launched a sandbox for banks.
Hong Kong’s digital currency activities
Meanwhile, the Hong Kong Monetary Authority (HKMA) is running at least three digital currency sandboxes, although this PoC was not part of them. The HKMA recently announced the expansion of its retail CBDC sandbox to include tokenized deposits. Plus, it has a sandbox for stablecoins and another for the institutional use of wholesale CBDC, which is part of Project Ensemble.
If you’re interested in bank-issued stablecoins and tokenized deposits, an early access version of our report is now available.
