The Hong Kong Monetary Authority (HKMA) has begun ‘Project Ensemble’, a new wholesale central bank digital currency (wCBDC) project, to support the development of the tokenisation market in Hong Kong. 

Through the new project, Hong Kong Monetary Authority will explore innovative financial market infrastructure (FMI) that will facilitate seamless interbank settlement of tokenised money through a wholesale CBDC.

The project will initially focus on tokenised deposits, a digital representation of commercial bank deposits, issued by commercial banks and made available to the general public. With wCBDC as the foundation, tokenised deposits will be used for tokenised asset transactions, hoping to unlock new opportunities for optimisation and innovation in the tokenisation era.

Eddie Yue, chief executive of the HKMA, explained: “Hong Kong has always championed innovation and international collaboration. Project Ensemble will provide fresh impetus to our vibrant financial industry and reinforce our forefront position in tokenised money and assets. We welcome global talents and industry players to come to Hong Kong and be part of this very exciting tokenisation journey.”

As part of Project Ensemble, later this year, HKMA will launch a new wCBDC Sandbox. The sandbox will support further research and test tokenisation use cases that include, among others, settlement of tokenised real-world assets (such as green bonds, carbon credits, aircraft, electric vehicle charging stations, electronic bills of lading and treasury management).

It could forge a new FMI that bridges the gap between tokenised real-world assets and money in transactions.

All eyes on the future 

To set industry standards and a future-proof strategy, the HKMA will form a wCBDC Architecture Community consisting of local and multinational banks, key players in the digital asset industry, technology companies and the CBDC Expert Group.

The HKMA will also continue to partner with Cyberport and Hong Kong Science and Technology Parks Corporation to foster the development of asset tokenisation and support homegrown fintech innovation.

Project Ensemble forms a key part of the HKMA’s broader portfolio of initiatives to facilitate the development of the tokenisation market, comprising e-HKD and collaboration with the BIS Innovation Hub Hong Kong Centre such as mBridge, Dynamo and Genesis.

It will also build on the experimentation of tokenised deposit use cases that the HKMA conducted with HSBC, Hang Seng Bank and Ant Group last year. The HKMA will engage relevant international stakeholders, including other central banks and organisations, to join future experiments and exploration in the wCBDC Sandbox.

Should the sandbox garners sufficient interest from the financial industry, the HKMA could eventually conduct a ‘live’ issuance of the wCBDC.

The Financial Conduct Authority (FCA), the UK financial regulator, is working to create the right conditions for investment, innovation and sustainable growth in the UK. On its mission to achieve this, the regulator has published findings on its wholesale data market study.

The FCA study examined competition in the markets for credit rating data, benchmarks and market data vendor services. It has ruled out significant intervention because of potential unintended consequences, such as on the availability and quality of data, in a market relied upon by investors worldwide.

However, across all three markets, the FCA identified areas where competition does not work well. Users may be paying higher prices for the data they buy than if the competition was working more effectively.

As a result, the FCA has expressed its intention to take forward ideas to help support wholesale data being available on fair, reasonable and transparent terms. This is a part of its work to ‘repeal and replace’ assimilated EU law.

Sheldon Mills, executive director of consumers and competition, FCA said: “The quality and availability of wholesale data is integral to well-functioning wholesale financial markets. Our market study found that firms can access the data they need to make effective investment decisions.

“We do not believe the case has been made for significant interventions. However, we will examine ways to help support wholesale data being provided on fair, reasonable and transparent terms.”

The report is part of the FCA’s work to help strengthen the UK’s leading position as a global and vibrant financial centre, by creating the right conditions for investment, innovation and sustainable growth, built on globally respected high standards.

The FCA will continue to consider allegations of anti-competitive conduct in all markets including in wholesale data markets. Additionally, the FCA has powers to tackle this under the Competition Act.

Taiwan’s central bank has completed a feasibility study of wholesale central bank digital currency (CBDC) and is continuing to consider its introduction. The central bank is seeking feedback from business and academics and will continue to work on platform design, deputy governor Mei-lie Chu said on Dec. 7. 

In a lengthy speech at an event for bankers, Chu outlined what she called Banking 4.0, or “services embedded in customers’ daily lives,” including the integration of artificial intelligence and advanced mobile and digital technology into banking. She devoted about half of her presentation to CBDC.

Chu referred to Bank for International Settlements research and said she saw the advantages of CBDCs and tokenization of real-world assets. Furthermore:

“A central bank currency with clearing finality can serve as the operational basis for tokenization.”

Chu mentioned unified ledger technology in particular. A unified ledger, as the name implies, uses a single ledger in a “partitioned data environment” to achieve interoperability among systems.

Related: Financial Supervisory Commission of Taiwan awards first securitized token license

According to the website CBDC Tracker, Taiwan began CBDC research in 2020. It is further along in its development of a retail CBDC, and has already tested a retail CBDC in a pilot project with consumers and five commercial banks.

Today’s #Fintech Digest includes the Palau Ministry of Finance on its stablecoin proof-of-concept, Taiwan’s central bank on its wholesale #CBDC feasibility study, and the Basel Committee giving a thumbs down to permissionless blockchain-based crypto. pic.twitter.com/8qTY4QJqCH

— John Kiff (@Kiffmeister) December 8, 2023

Bank disintermediation and interoperability with other payment systems were outstanding issues in Taiwan’s CBDC research, Chu said. The central bank is taking a “prudent” approach to further development of a CBDC with no timeline for a decision, Chu added.

In addition, Taiwan’s Fubon Bank has participated with Ripple and the Hong Kong Monetary Authority in a reverse mortgage pilot project using Hong Kong’s e-HKD CBDC. It has also integrated China’s e-CNY digital yuan into its platform.

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