Today the Hong Kong Monetary Authority (HKMA) launched the Project Ensemble Sandbox to support institutional experimentation with tokenization, both traditional securities and real world assets (RWA). The initiative also involves an experimental wholesale CBDC (wCBDC) to enable interbank settlement between the tokenized deposits of banks.
Four banks are providing the tokenized deposits: HSBC, Standard Chartered (Hong Kong), Bank of China (Hong Kong) and Hang Seng Bank. Other direct participants are Microsoft Hong Kong, Ant Digital Technologies (ADT) and Hashkey Group.
The Securities and Futures Commission (SFC) is partnering with HKMA for one of the four trial categories relating to fixed income and funds, where BlackRock and Franklin Templeton are amongst the ‘non community’ participants.
Julia Leung, SFC CEO said the Sandbox is an “example of how innovation and regulation can go hand in hand to blaze a new path for our financial markets. As two major architects of Hong Kong’s financial markets, the SFC and the HKMA share the same vision and dedication to future-proofing the city’s financial system through innovative market infrastructure.”
Unlike stablecoins where payments involve a single token transfer, a tokenized deposit is a digital twin. Hence, a token transfer from the client of one bank to another also requires the banks to settle with each other in their off-chain books. That can be done with a payment using the conventional RTGS system, or ideally with a wholesale CBDC.
Liquidity, supply chain and green finance use cases
Meanwhile, another Sandbox application category is for liquidity management, including repo and treasury management. Ant International (not ADT), is collaborating with StanChart and HSBC to develop a global liquidity management solution. The goal is to use Ant’s Whale platform for treasury management to help the banks to exchange their tokens. Ultimately, this aims to support real-time 24/7 cross border payments.
Supply chain finance is an area to be explored in the Sandbox. One use case involves issuing electronic bills of lading (eBL) on the Global Shipping Business Network (GSBN) blockchain infrastructure. These eBLs are tokenized by Ant Digital Technologies to support money movements for trade finance using tokenized deposits, with interbank settlement using wCBDC. The ICC Digital Standards Initiative is a participant in another trade related use case.
The fourth application area is for green finance, which attracted the most external participants (8) including local stock exchange HKEX.
Apart from these four areas, the HKMA said it would continue to engage with the community to potentially add more. Plus, it’s exploring collaborating with the BIS Innovation Hub on one or more themes.
The HKMA is also taking part in the European Central Bank wholesale DLT settlement trials. They aim to test the interoperability between the Project Ensemble platform and the Banque de France DL3S blockchain for wCBDC.
Ledger Insights Research has published a report on bank-issued stablecoins and tokenized deposits featuring more than 70 projects. Find out more here.
