Banque de France Joins Forces with Hong Kong Monetary Authority to Advance CBDC and Tokenization

CBDC Representatives from Banque de France and Hong Kong Monetary Authority signing Memorandum of Understanding

Banque de France and HKMA Sign MoU to Advance CBDC and Tokenization

Under the terms of a deal called the Memorandum of Understanding (MoU), the Banque de France (BDF) and the Hong Kong Monetary Authority (HKMA) have stepped into a significant channel to dual work out the necessary wholesale Central Bank Digital Currencies (CBDCs) and the Tokenization through the process of bilateral cooperation.

Enhancing Cross-Border Transaction Efficiency

According to a press release from the HKMA Institute, the HKMA further wishes to promote the interconnection of their CBDCs and the reduction of cross-border trade processing times through the mechanism of cross-border settlements. This track is in tandem with the BDF’s structured DL3S Infrastructure that is acting as a foundational platform for future CBDC integration.

Project Ensemble to Study Asset Tokenization

HKMA unveiled the Ensemble Project in March, a study focused on asset tokenization and a CBDC project that will be financed through this program. The conglomerate has the stakeholders who are regulators from the Architecture Community of Hong Kong, the Bank for International Settlements (BIS), as well as the major local banks. HashKey crypto exchange, Ant Digital Technologies and Microsoft Hong Kong are also part of the project. There is a plan for the launch of research and testing in the upcoming months.

Collaborative Efforts and Future Testing

Denis Beau, First Deputy Governor at the BDF, showed his delight in the partnership, and expressed the belief that the timing of the HKMA’s Project Ensemble announcement was just right. Beau also stated the readiness of the BDF to continue organising trials on their DL3S instrument in a cooperative mode.

Ongoing Projects and Interoperability Testing

Namely, the HKMA and BDF are already working on other projects together. Just recently, the HKMA participated in the second phase of the regalbacis led by the European Central Bank, which is conducting the distributed ledger technology test and the blockchain module for interoperability for the settlement of tokenized government bonds. Concurrently, on the other hand, the BDF is only an observer in Project mBridge, a major CBDC-related activity, which is the HKMA among mBridge’s original participants.


Hong Kong’s CBDC Developments

In fact, the CBDC of Hong Kong, the so-called e-HKD, was already developed by the end of 2021 and currently, it tests its second phase. The HKMA has been experimenting with still more CBDC applications. To be precise, a retail e-HKD was a pilot project in collaboration with BIS in Project Aurum. Also, they worked with BIS and the United Nations to issue tokenized “green” bonds and with Ripple and Visa to study the area of real estate tokenization.

Tokenized Assets to Reach $2 Trillion by 2030

Investment analysts from McKinsey & Company predict that the size of the market for tokenized financial assets will be close to $2 trillion by 2030 with a simulation of the bullish scenario that could double the existing size to about $4 trillion. On the one hand, companies like attract more customers than before in the field of tokenized treasuries. Particularly, the RWA platform has located most of its assets in tokenized U.S. treasuries and bonds, which reached a new high of $1.29 billion, marking a 80% increase from the beginning of 2024. The process of enhancing the operators of protocols such as Securitize, and Ondo, is the most vigorous part of this trend.

This partnership provides HKMA with the necessary steps of a significant achievement possibility in the improvement of the financial sector.