|  NEWS

Hong Kong’s financial authorities have revealed a prototype of a central bank digital currency (CBDC) known as Project Aurum. 

The two-tier platform comprises of a wholesale interbank system and retail e-wallet. The latter is created at a local bank, Cointelegraph reports. As part of the project, retail tokens and stablecoins will be issued.

The prototype for the CBDC stems from a collaboration between the BIS Innovation Hub Hong Kong Centre, the Hong Kong Monetary Authority and the Hong Kong Applied Science and Technology Research Institute, according to the Bank for International Settlements.

The two types of digital tokens involved in Project Aurum are an intermediated digital currency and a CBDC-backed stablecoin distributed in the interbank system.

The Bank for International Settlements stated: “The latter is unique in the study of CBDC to date. Privacy, safety and flexibility are core to the system.

“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. Indeed, what distinguishes Aurum from private sector stablecoins is that Aurum’s stablecoin balances are reconciled, versus real time gross settlement (RTGS) balances of the issuing bank with the central bank.”

The system of CBDC-backed stablecoins can be utilised by monetary authorities in establishing the regulatory stance in terms of private sector stablecoins, “especially while seeking to design methods to verify the backing of the stablecoins, a highly topical matter.” Three financial institutions in Hong Kong will have the authorisation to issue state-backed digital coins, Bitcoin.com reports.

Hong Kong initially launched its CBDC research in June last year within the Fintech 2025 Strategy. Project Aurum is the first project finalised by the BIS Innovation Hub.

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