Hong Kong Launches a Sandbox for Project Ensemble, a Wholesale CBDC Project

This initiative brings the region closer to integrating tokenization within its traditional financial industry. Wholesale CBDCs are designed for use by financial institutions

Hong Kong is now home to a sandbox for Project Ensemble, a wholesale central bank digital currency (CBDC) project. This effort brings the region closer to integrating tokenization within its traditional financial industry. Wholesale CBDCs are designed for use by financial institutions, unlike retail CBDCs, which are meant for the general public’s everyday transactions. Wholesale CBDCs focus on interbank settlements and large-value payments.

The sandbox is launched by the Hong Kong Monetary Authority (HKMA), which is the central banking institution of the region. The sandbox will initially explore four key areas: basic money and investment management, liquidity, sustainable and green finance, and trade finance and supply chain management. The sandbox will take the form of an experiment in the use of interbank settlement through tokenized money.

Some of the key players involved in Project Ensemble are the Bank of China, HSBC, Hang Seng Bank, and Standard Chartered Bank among others. Some of the companies in technology and finance who will attend are Ant Digital, HashKey, and Microsoft as well as asset managers such as BlackRock and Franklin Templeton among others.

These banks’ tokenized deposit platforms have been integrated into the sandbox by the HKMA. It will also encourage payment-versus-payment and delivery-versus-payment tests. The first set of experiments will concern the creation of new tokens with a focus on financial and real-world assets reflecting the four pillars of the HKMA initiative.

Particularly, the HKMA highlighted the need for a robust framework that would foster the sustainability of the tokenized asset market in Hong Kong. The Hong Kong Monetary Authority (HKMA) plays a significant role in this process, cooperating with the Securities and Futures Commission (SFC) in encouraging the asset management industry to use tokenization more actively.

Globally, the HKMA aims to partner with the BIS Innovation Hub Hong Kong Centre and involve the CBDC Expert Group in the expansion of the sandbox. The HKMA sees the sandbox as a major leap toward the development of tokenization and innovation in the financial sector of Hong Kong.

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