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Financial authorities in Hong Kong have unveiled a prototype of the Chinese autonomous territory\u2019s own central bank digital currency called Project Aurum. The two-tier platform features a wholesale interbank and a retail e-wallet system, participants revealed.<\/strong><\/p>\n A collaboration between the BIS Innovation Hub Hong Kong Centre, the Hong Kong Monetary Authority (HKMA<\/a>), and the Hong Kong Applied Science and Technology Research Institute has produced a prototype of Hong Kong\u2019s upcoming digital currency, the Bank for International Settlements (BIS<\/a>) announced.<\/p>\n Project Aurum is a full-stack, front-end and back-end, central bank digital currency (CBDC<\/a>) system comprising a wholesale interbank system and a retail e-wallet system, the international financial institution explained in a press release this week.<\/p>\n Participants in Aurum want to launch two different types of digital tokens. The first kind will be an intermediated digital currency while the second one will be a CBDC-backed stablecoin circulated in the interbank system. The BIS remarked:<\/p>\n The latter is unique in the study of CBDC to date. Privacy, safety and flexibility are core to the system.<\/p>\n<\/blockquote>\n \u201cBringing CBDC-backed stablecoins to life has never been done before and we, therefore, felt that doing so may supplement the growing body of research on private sector stablecoins,\u201d the project\u2019s authors elaborate. They further explain that in contrast with private stablecoins, Aurum\u2019s stablecoin balances are reconciled, versus real-time gross settlement balances of the issuing bank with the central bank.<\/p>\n The developers believe that the system of CBDC-backed stablecoins can be used by monetary authorities when they try to work out the regulatory approaches in regard to private sector stablecoins, \u201cespecially while seeking to design methods to verify the backing of the stablecoins, a highly topical matter.\u201d Just like with its fiat currency, three of Hong Kong\u2019s financial institutions will be authorized to issue state-backed digital coins.<\/p>\n Hong Kong, one of the world\u2019s major financial centers, has been intensifying efforts to catch up with others on the CBDC development front, including mainland China which has been expanding<\/a> the digital yuan (e-CNY) pilot. The Chinese special administrative region started exploring the issuance of its own CBDC in March 2021.<\/p>\n In September of this year, the HKMA said<\/a> that it was preparing to trial a digital version of the Hong Kong dollar (e-HKD) in the coming months. The monetary authority also took part in trials<\/a> of cross-border CBDC transactions with the People\u2019s Bank of China and the central banks of Thailand and the United Arab Emirates.<\/p>\nHong Kong to Issue Retail Tokens and Stablecoins as Part of Project Aurum<\/h2>\n
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