Today the Hong Kong Monetary Authority (HKMA) announced collaborations with the central banks of Brazil and Thailand for cross border tokenization transactions, including atomic settlement of digital asset transactions (delivery versus payment / DvP) and wholesale CBDC (payment versus payment / PvP). Additionally, the HKMA plans to provide grants of up to HK$2.5 million for digital bond issuances to promote Hong Kong as a tokenization venue.
Hong Kong has previously issued two tokenized government green bond issuances, one tokenized (so the primary issuance was conventional) the other natively digital. The second one was worth more than US$750 million across multiple currencies and was the largest digital bond at the time. It has since been eclipsed by two KfW issuances.
As part of Hong Kong’s push to promote the digital asset ecosystem, it soon plans to publish guidelines for a new Digital Bond Grant Scheme that will offer a maximum grant of HK2.5 million for each eligible issuance.
Cross border collaborations
Given Brazil’s hugely successful launch of its Pix real time payment system, many are eagerly watching the progress of DREX, the Banco Central do Brasil’s wholesale CBDC and tokenization project. DREX recently announced the 13 themes to be trialed and re-opened applications for participants. Now DREX and Hong Kong’s Project Ensemble tokenization project will trial cross border transactions, including for trade finance and carbon credits.
Previously, Hong Kong conducted a trial with the Banque de France.
HKMA unveiled a similar collaboration with the Bank of Thailand, with whom it previously partnered for CBDC in Project Inthanon-LionRock. That initiative expanded to mBridge, the cross border CBDC project that has reached the minimum viable project stage.
The Thai collaboration will involve Thailand’s Project San, an internal experiment that is testing a tokenization ecosystem. This includes wholesale settlement, Ethereum-compatible ledgers for tokenized deposits and digital assets, plus an interoperability mechanism.
HKMA emphasized the interoperability work, specifically how to enable the interoperability of separate distributed financial market infrastructures (dFMIs).
For the interoperability aspect, the HKMA is also a new associate member of the Linux Foundation (LF) Decentralized Trust (an evolution of Hyperledger), joining seven other central bank members that are collaborating on the technical requirements for central bank digital currencies (CBDC).
Project Ensemble Sandbox update
Additionally, the HKMA provided an update on its Project Ensemble Sandbox for wholesale CBDC, tokenized deposits and tokenization. It previously outlined some of the planned use cases, and today disclosed which ones have completed. JP Morgan has joined the sandbox alongside two technology firms, R3 and Tencent affiliate, WeBank Technology Services.
It added a new use case for tokenized or digital funds involving China Construction Bank (Asia), Fubon Bank (Hong Kong), JETCO and OSL Digital Securities.
These announcements were part of the Hong Kong Fintech Week. This morning, keynotes by the Treasury, Securities and Futures Commission and HKMA involved sharing other updates on stablecoins and cryptocurrency.
