Hong Kong completed its central bank digital currency (CBDC) prototype, Project Aurum. It was a little different from other retail CBDC projects because it included both a bank-intermediated CBDC token and a CBDC-backed stablecoin.
The reason for trialing a stablecoin is because it digitally mirrors Hong Kong’s cash system in which three commercial banks issue paper money notes backed by central bank reserves.
The e-HKD initiative involved the Hong Kong Monetary Authority (HKMA), and the BIS Innovation Hub with technical support from the Hong Kong Applied Science and Technology Research Institute (ASTRI).
With the intermediated approach adopted in the project, the central bank operates the wholesale interbank ledger, and commercial banks distribute the CBDC, which is a central bank liability. Hence the solution involved a wholesale interbank system and a retail e-wallet system.
The BIS views this intermediated approach as having several benefits. One is privacy related because the central bank doesn’t interface with consumers nor have access to their data, leaving privacy, identity and anti money laundering issues to the banks. Another is cyber resilience, given the separation of roles. However, there is a greater reliance on intermediaries.
The prototype source code is being made available to the central bank community.
Given the project has been completed, in September the Hong Kong Monetary Authority (HKMA) shared its CBDC roadmap as it transitioned from its research phase and moved to development. The HKMA is also involved in the MBridge multi-CBDC project for cross border payments. And it’s working with the Bank of Israel on CBDC cybersecurity.