The Hong Kong Monetary Authority (HKMA) is Hong Kong’s currency board and the De Facto Central Bank. It is conducting research into an application for a Central Bank Digital Currency (CBDC). 

During the Hongkong Fintech week, Ejinsight reported that HKMA aims to release a major report on its findings in Q1 2020. 

Collaboration with the People’s Bank of China

HKMA had also reported that it had signed a Blockchain collaboration with a subsidiary of the Institute of Digital Currency at the People’s Bank of China (PBoC). This is an institution which many expect will be the first globally to launch a Central Bank Digital Currency. 

HKMA’s senior executive Director Edmond Lau gave insights into the bank’s ongoing CBDC research, which has reportedly been conducted under the aegis of “Project LionRock”. 

The project is being carried together with HongKong Interbank Clearing Ltd. and three more banks, as well as blockchain consortium R3.

It comprises a proof of concept study on token-based CBDC, research into debt securities issuance using blockchain, evaluation of CBDC’s potential for payment systems and exploration of a possible two-tier issuance model, which will allow corporates to use and hold CBDC tokens as sponsored participants of their banks.

HKMA’s main focus on the prospective use of a CBDC for financial institutions rather than retail clients with a particular interest in domestic interbank payments, wholesale corporate payments and its potential for delivery-versus-payment in debt securities settlement.

HKMA also signed note of understanding with the bank of Thailand to lead a joint research project into the use of a CBDC for cross-border payments and interbank payment-versus-payment services between the countries.

 

Picking and choosing

Joe Lubin CEO of ConsenSys and co-founder of Ethereum (ETH) beliefs that the People Bank Of China is unlikely to implement the decentralized aspects of blockchain for its forthcoming CBDC. 

Lubin argued the asset is likely to be used to maintain authorities’ existing oversight of capital flows and that, if anything, the PBoC will make use of “some of the cryptographic primitives of blockchain.” 

Recently Mu Changchun Deputy Director of PBoC revealed that CDBC will be structured as a centralized, two-tier system, with the PBoC at the top tier and the second tier controlled by domestic commercial banks.

Bank of Thailand together with global leader Wipro limited and R3 finalized a Blockchain solution prototype for wholesale CBDC-based interbank settlements this spring.