HKMA Drives Global Tokenization, CBDC Partnership

The Hong Kong Monetary Authority (HKMA) collaborates with Brazil and Thailand’s central banks to advance global tokenization and CBDC use.

The Banco Central do Brasil (BCB) and the Bank of Thailand (BOT) have collaborated with the Hong Kong Monetary Authority (HKMA) to facilitate cross-border tokenization. The HKMA disclosed this information in two distinct releases.

The agency and the Banco Central do Brasil will establish a connection between their experimental central bank digital currency (CBDC) infrastructures, Ensemble Sandbox, and the Drex pilot platform to evaluate cross-border settlement use cases such as trade finance and carbon credits.

In August, the Hong Kong financial watchdog initiated the Ensemble Sandbox to conduct experiments with industry participants in four critical areas: liquidity management, green and sustainable finance, trade and supply chain finance, and fixed income and investment funds.

This announcement results from an agreement between the HKMA and the BCB signed in 2018. The two institutions are committed to promoting innovation in financial services in their respective markets. Banco Central do Brasil initiated the second phase of its Drex pilot in September, collaborating with more than 70 companies to establish a tokenized financial market in Brazil.

Mr. Eddie Yue, the Chief Executive of the HKMA, has stated that the collaboration between the BCB and the organization, which was initiated a few years ago, has yielded promising results. He observed that Ensemble collaborates closely with industry partners to advance the tokenization market and commended the BCB as an exceptional partner who shares a similar vision for the future of the financial industry. According to Mr. Yue,

“Project Ensemble is all about collaboration with industry partners to advance the tokenisation market.  In this regard, the BCB is an excellent partner, especially as we share a common vision of driving the future of the financial industry through technology. We are both taking concrete steps to turn this vision into reality.”

Roberto Campos Neto, Governor of Banco Central do Brasil, underscored the significance of the partnership in the new phase of Drex’s construction. He observed that establishing a well-integrated global financial market is contingent upon cross-border experimentation.

HKMA’sHKMA’s Vision for Tokenization with the BCB and the BOT

In addition, the HKMA and the BOT initiated a partnership in 2019 by signing a Memorandum of Understanding (MoU). This partnership, comparable to the one with the BCB, is dedicated to developing tokenized settlement methods to improve the security and efficiency of critical financial operations.

Mr. Howard Lee, the Deputy Chief Executive of the HKMA, stated that the HKMA and the BOT shared similar objectives in their pursuit of using central bank digital currency (CBDC) for cross-border transactions. He expressed confidence that the project would provide valuable insights for both jurisdictions.

“The HKMA and the BOT have a similar perspective on the potential of cross-border applications that utilize central bank digital currency. Expanding our partnership to investigate cross-border tokenization use cases further emphasizes this shared vision. “I am confident that this collaboration will provide both jurisdictions with valuable insights, as it has in our previous projects,” he stated.