The Banque de France (BDF) and the Hong Kong Monetary Authority (HKMA) have announced a partnership focused on wholesale central bank digital currencies (CBDCs) and the tokenization of financial assets. This collaboration aims to promote financial innovation and enhance interoperability in digital currencies, marking a significant milestone in the field.
According to a press release, the HKMA’s participation in the European Central Bank’s (ECB) Eurosystem exploratory work is a major step forward, making it one of the first central banking institutions outside the Eurosystem to join the initiative.
Through a Memorandum of Understanding (MoU), the BDF and HKMA plan to advance the study of wholesale CBDCs and tokenization, strengthening communication and collaboration. The emphasis will be on interoperability between the BDF’s DL3S infrastructure and the HKMA’s Project Ensemble Sandbox.
The interest in CBDCs has been surging globally, with 94% of central banks exploring the potential for digital currencies to stay competitive with private digital currencies. The Bank for International Settlements (BIS) and the International Monetary Fund (IMF) have been vocal advocates for CBDCs, highlighting their role in modernizing the financial system and improving cross-border transaction efficiency.
Most central banks are currently focusing on wholesale CBDCs for large transactions between financial institutions, rather than retail CBDCs for the general public. The likelihood of central banks issuing wholesale CBDCs within the next six years is higher, as some regulators believe retail CBDCs carry the risk of destabilizing the financial system.
The BIS has also expressed support for tokenization initiatives to enhance efficiency, transparency, and security of financial transactions. Projects like Project Promissa and Project Aurum focus on digitizing financial instruments and exploring privacy aspects of CBDCs.
