The concept of tokenisation has several meanings and promises to drive a seismic shift in global finance in a number of ways.
Looking to harness this potential, the Hong Kong Monetary Authority (HKMA) launched ‘Project Ensemble’ in March earlier this year, a wholesale central bank digital currency (wCBDC) project, to support the development of the tokenisation market in the region.
Through the project, HKMA explores financial market infrastructure that facilitates seamless interbank settlement of tokenised money through a wCBDC.
On 28 August 2024, HKMA officially launched the Project Ensemble Sandbox, which will test a wide range of tokenisation use cases, including the settlement of tokenised real-world assets (such as green bonds, carbon credits, aircraft, electric vehicle charging stations, and treasury management).
Having completed building the sandbox, HKMA will use it to facilitate interbank settlement using experimental tokenised money, focusing on transactions involving these tokenised assets.
Hong Kong’s Securities and Futures Commission (SFC) will support the development of a regulatory framework, in a move to bolster sustainable growth of the tokenised asset market. The SFC will also look to promote wider adoption of tokenisation solutions and enhance Hong Kong’s position as a premier asset and wealth management centre.
Eddie Yue, chief executive at HKMA
“Since the launch of Project Ensemble in March, we have been encouraged by the strong interest from the industry in pioneering innovative solutions to redefine the digital finance landscape,” explained Eddie Yue, chief executive of the HKMA. “The HKMA looks forward to collaborating with the SFC, other central banking institutions, academia, and all relevant industry participants to further drive innovation and progress in the Hong Kong tokenisation market.”
The tokenisation community
In May, HKMA established the Project Ensemble Architecture Community, a diverse group of industry representatives which would collaborate to shape industry standards, and provide suggestions to support the development of Hong Kong’s tokenisation market.
This Community will initially focus on setting up a mechanism which supports the interbank settlement of tokenised deposits through wCBDC for tokenised asset transactions.
One such participant is Ant Digital Technologies, a technology subsidiary of Ant Group (best known for owning Alipay, the world’s largest mobile payment platform).
The firm has participated in building the Tokenised Asset Platform within the Sandbox, which offers asset tokenisation services and facilitates delivery-versus-payment transactions for traditional assets and tokenised deposits. It supports transactions between accounts within the same bank, as well as cross-bank transactions.
Zhao Wenbiao, CEO of Ant Digital Technologies, commented: “We are grateful to the HKMA and the SFC for their innovative approach and vision, which have enabled us to explore various innovative projects. Looking ahead, we hope to provide support to more real-world asset (RWA) projects, especially in the new energy sector, both in China and globally. We also welcome partners to explore more use cases in the real economy with us.”
Asset tokenisation use cases
The Hong Kong Monetary Authority also unveiled four main themes of asset tokenisation use cases for the initial round of experimentation:
Fixed income and investment funds
Liquidity management
Green and sustainable finance
Trade and supply chain finance
Supporting green and sustainable finance, Ant Digital Technologies also revealed it is driving the growth of local renewable energy businesses through the initiative.
The firm is leveraging its blockchain and Internet of Things (IoT) technologies to record the real-time operational status of physical assets and upload this information to the blockchain. With the support of Project Ensemble and Ant Digital Technologies, Shenzhen-listed Longshine Technology Group, a new energy company, has digitised over 9,000 of its charging piles as RWAs.
Following this, the company successfully secured its first cross-border financing for RWAs in Hong Kong, which should bolster its already rapid growth.
HSBC, Hang Seng Bank, and Bank of China (Hong Kong) were also able to successfully facilitate the use of tokenised deposits to settle the transfer of an electronic Bill of Lading (eBL), an important trade document of title, issued over Global Shipping Business Network, through Ant Digital Technologies’ tokenised asset platform.
Looking to the future
The HKMA explained that it plans to explore collaborating with the Bank for International Settlements (BIS) at its Innovation Hub in Hong Kong. It will also engage with the CBDC Expert Group to leverage its subject matter expertise to further advance the sandbox.
The results from tests done in the HKMA’s new sandbox may well impact the future existence of an e-HKD, Hong Kong’s CBDC project. Should participants make significant progress with tokenised assets and find a wide range of use cases to support, the region may well decide to pull the trigger on its own CBDC.
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