The upcoming digital currency of Hong Kong has been prototyped thanks to a partnership between the BIS Innovation Hub Hong Kong Centre, the Hong Kong Monetary Authority (HKMA), and the Hong Kong Applied Science and Technology Research Institute, according to the Bank for International Settlements (BIS).
The international banking institution described Project Aurum in a press release this week as a full-stack, front-end and back-end central bank digital currency (CBDC) system composed of a wholesale interbank system and a retail e-wallet system.
Aurum participants aim to introduce two different kinds of digital tokens. The first type will be an intermediary digital currency, while the second type will be an interbank stablecoin backed by CBDC.
The authors of the project stated that “bringing 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.”
Aurum’s stablecoin balances are described to be reconciled, as opposed to real-time gross settlement balances of the issuing bank with the central bank, as are the case with private stablecoins.
The developers of the system argue that monetary authorities can use it to establish regulatory strategies for private sector stablecoins, especially when striving to design techniques to verify the backing of the stablecoins — which is a concern that is highly talked about in recent days. Three financial institutions in Hong Kong will be permitted to produce state-backed digital currencies, similar to its fiat currency.
One of the major financial hubs of the globe, Hong Kong has been stepping up its attempts to catch up to others on the CBDC growth front, notably mainland China, which is already expanding the digital yuan pilot. In March 2021, the Chinese Special Administrative Region began looking into the possibility of creating its own CBDC.
