Last week we reported that the Hong Kong Monetary Authority (HKMA) launched its Project Ensemble Sandbox. The primary purpose is to trial a wholesale central bank digital currency (wCBDC) as a settlement tool for tokenized deposits. Additionally, various tokenization trials will use tokenized deposits for settlement. Some of the four banks involved in the trials – HSBC, HSBC-owned Hang Seng Bank, Standard Chartered HK and Bank of China HK – ran trials as part of the setup process for the Sandbox. They shared the details.
As previously noted, the tests will also include two high profile asset managers, BlackRock and Franklin Templeton.
HSBC & Hang Seng Bank
HSBC ran three Proofs of Concept (POCs) as part of the Sandbox setup. One for a purchase of digital bonds on the HSBC Orion platform using tokenized deposits recorded on the HSBC ledger. Another was the interbank transfer of tokenized deposits with Hang Seng Bank, using the Ensemble interoperability platform. And the third was the use of tokenized deposits for settlement of electronic bills of lading (eBL) initially issued via the GSBN blockchain and tokenized by Ant Digital. Hang Seng Bank also took part in the eBL tests.
It plans to continue to use tokenized deposits within the Sandbox to settle tokenized asset transactions. Plus, it wants to contribute to developing standards for the interbank settlement of tokenized deposits.
On that point, because tokenized deposits are essentially digital twins, an on chain payment from the client of one bank to the client of another also requires an interbank settlement. That could be done with a conventional central bank money payment, but HKMA is providing a wholesale CBDC as an alternative. That way token transfers can be mirrored with interbank wCBDC transfers.
Standard Chartered and tokenized deposits
StanChart plans to run three PoC trials. During previous retail CBDC trials, the bank conducted a deep dive on some of the potential applications for trade and supply chain finance. Likewise, tokenized deposits can help to improve the workflow.
It plans to trial the use of tokenized money for the settlement in a bond issuance.
Plus, it’s partnering with Ant International for liquidity management. Ant wants to use tokenized deposits from both StanChart and HSBC to make real time and 24/7 cross border payments as part of its corporate treasury solution Ant Whale. It has already partnered with other global banks.
For all its use cases, the tokenization technology is provided by Libeara, the startup incubated by SC Ventures.
Bank of China (Hong Kong)
Bank of China Hong Kong (BOCHK) said it already ran some interbank payment and delivery versus payment trials as part of the setup of the Sandbox.
Going forward, it plans two sets of trials. One is to validate the trading of tokenized assets by tokenizing traditional assets such as fixed income and investment funds with BOCI-Prudential Trustee and BOCHK Asset Management. It then wants to use the tokenized deposits for liquidity management to pilot 24/7 asset trading.
Many people question the need for 24/7 asset trading. However, one feature of blockchains is they tend to be international, even if institutional applications require local compliance. Hence, while there may be weak domestic demand to trade in the middle of the night, there could be an appetite for it during the trading day in other time zones. There’s especially a demand for settlement outside of restricted hours.
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