The Banque de France (BDF) and the Hong Kong Monetary Authority (HKMA) have entered into a Memorandum of Understanding (MoU) to collaborate on the development of wholesale central bank digital currency (CBDC) and asset tokenization, aiming to enhance cross-border transaction efficiency and interoperability.

Several months ago, the HKMA launched Project Ensemble to delve into asset tokenization and create a supporting CBDC. Now, with this MoU, the HKMA and BDF are set to explore interoperability between their respective CBDC infrastructures and improve the efficiency of cross-border transaction settlements. The BDF already has its DL3S infrastructure in place for the introduction of a CBDC, while the HKMA will leverage the Project Ensemble sandbox for their research.

Project Ensemble, initiated by the HKMA in March, aims to study asset tokenization and establish a CBDC framework to support it. The project has gathered a diverse group, including Hong Kong regulators, the Bank for International Settlements (BIS), major local banks, the HashKey crypto exchange, Ant Digital Technologies, and Microsoft Hong Kong. The research and testing phase for Project Ensemble was slated to begin midyear.

Denis Beau, First Deputy Governor of the BDF, emphasized the timely nature of the HKMA’s Project Ensemble announcement, expressing eagerness to test the DL3S platform within this collaborative context. This partnership reflects the ongoing commitment of both institutions to advancing digital currency and tokenization technologies.

The HKMA and BDF have a history of collaboration in other significant projects. Recently, the HKMA joined the European Central Bank’s (ECB) second wave of distributed ledger technology testing participants, focusing on the interoperability of blockchain modules for the settlement of tokenized government bonds. Additionally, the BDF serves as an observer in Project mBridge, the largest CBDC-related project to date, in which the HKMA is an original participant.

Hong Kong’s journey with CBDCs began in 2021 with the development of the e-HKD, now in the second phase of its pilot. The HKMA has been notably active in researching CBDC applications, including testing a retail e-HKD with a complex structure in collaboration with the BIS through Project Aurum. Further, the HKMA has engaged in various projects with BIS and the United Nations to develop tokenized “green” bonds and with Ripple and Visa to explore real estate tokenization.

This MoU between the BDF and HKMA marks a significant step forward in the global exploration of CBDC and tokenization, promising advancements in the efficiency and interoperability of digital financial systems. As both organizations continue to innovate and collaborate, the future of digital currency looks increasingly integrated and technologically advanced.