Central Bank Digital Currency (CBDC)

The HKMA has been researching CBDCs since 2017 to understand their benefits and potential applications. As part of the “Fintech 2025” strategy announced in 2021, the HKMA has placed increased emphasis on strengthening its research work to increase Hong Kong’s readiness in issuing CBDCs that can potentially be used by individuals, corporates and financial institutions.

Wholesale CBDC

The HKMA’s initial exploration of CBDCs focused on wholesale CBDCs. In 2017, the HKMA commenced its CBDC journey with Project LionRock. This was a proof-of-concept (PoC) project that studied potential applications of CBDCs in handling large-value payments and delivery-versus-payment settlements. This project was named after Hong Kong’s most iconic mountain, in collaboration with the three note-issuing banks and the Hong Kong Interbank Clearing Limited.

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Project Inthanon-LionRock

In 2019, the HKMA and the Bank of Thailand (BOT) commenced Project Inthanon-LionRock to study the application of CBDCs for cross-border payments. This project was completed in December 2019 and a DLT-based PoC prototype was developed successfully together with ten participating banks from both places. The HKMA and the BOT jointly published a leaflet and a report in November 2019 and January 2020 respectively to present the key findings.

Inthanon-LionRock: Leveraging Distributed Ledger Technology to Increase Efficiency in Cross-Border Payments (Leaflet)

Project Inthanon-LionRock entered the second phase in 2020. With the joining of the Digital Currency Institute of the People’s Bank of China (PBC DCI) and the Central Bank of the United Arab Emirates (CBUAE) in February 2021, and with the strong support of the Bank for International Settlements Innovation Hub (BISIH) Centre in Hong Kong, the project has evolved into the third phase and was renamed as the Multiple CBDC Bridge (mBridge).
Project mBridge

Project mBridge further explores the capabilities of DLT, through developing a trial platform, to facilitate real-time cross-border foreign exchange payment-versus-payment transactions in a multi-jurisdictional context and on a 24/7 basis. Project mBridge also explores business use cases in a cross-border context using both domestic and foreign currencies. Participating institutions jointly published a report in September 2021 to deliver the key takeaways of Project Inthanon-LionRock Phase 2 and introduce the scope of mBridge.

Inthanon-LionRock to mBridge: Building a multi CBDC platform for international payments

A brochure was published in November 2021 to present the development progress of Project mBridge, including the potential business use cases identified, trial transactions on international trade settlement, and an outline of the future roadmap of the platform.

mBridge: Building a multi CBDC platform for international payments

In Q3 2022, Project mBridge entered the pilot phase. During the six-week pilot, 20 banks in four jurisdictions used the mBridge platform to conduct over 160 payment and foreign exchange transactions totalling more than HK$171 million. It was among the first multi-CBDC projects to settle real-value, cross-border transactions on behalf of corporates. A report was published in October 2022 to deliver the results and key lessons learnt of the pilot.

Project mBridge: Connecting economies through CBDC

A brochure was published in October 2023 to provide an update on and outline the next steps for Project mBridge.

Project mBridge Update: Experimenting with a multi-CBDC platform for cross-border payments
Project Ensemble

In March 2024 the HKMA launched Project Ensemble, a new wholesale central bank digital currency (wCBDC) project, to support the development of the tokenisation market in Hong Kong. Project Ensemble seeks to explore innovative financial market infrastructure (FMI) that will facilitate seamless interbank settlement of tokenised money through wCBDC. The project will initially focus on tokenised deposits, which is a digital representation of commercial bank deposits. With wCBDC as the foundation, tokenised deposits can be used for tokenised asset transactions.

At the core of Project Ensemble is the Project Ensemble Sandbox (Sandbox) that will be launched in 2024 to further research and test tokenisation use cases, including, among others, settlement of tokenised real world assets. It could potentially forge a new FMI that bridges the existing gap between tokenised real world assets and money in transactions. If the Sandbox garners sufficient interest from the industry, the HKMA will consider conducting a “live” issuance of wCBDC at an appropriate time.

For general enquiries about Project Ensemble, please contact us via ensemble@hkma.gov.hk . For enquiries about the Sandbox, please reach out to us via ensemble_sandbox@hkma.gov.hk .

To help set industry standards and a future-proof strategy, the HKMA formed the Project Ensemble Architecture Community (the Community) in May 2024. Please refer to the relevant section below for more details of the Community.

Project Ensemble Architecture Community

The Community aims to develop a set of industry standards to support interoperability among wCBDC, tokenised money and tokenised assets. It will make recommendations on specific topics, initially focusing on setting up a mechanism to support seamless interbank settlement of tokenised deposit through wCBDC for tokenised asset transactions.

The formation of the Community is based on a range of careful considerations, including the members’ expertise in contributing to the development of the tokenisation market in Hong Kong, experience and competency in relevant fields and innovative capability. The HKMA will be working closely with the industry, and review the size and composition of the Community from time to time as and when deemed appropriate.

For enquiries about the Community, please contact us via ensemble_ac@hkma.gov.hk .

List of Community Members (by alphabetical order for each category)

Project Ensemble Sandbox

The HKMA has completed the building and setup of the Sandbox, which is designed to facilitate interbank settlement using experimental tokenised money, focusing on transactions involving tokenised assets. Through the Sandbox, the HKMA seeks to examine technical interoperability among tokenised assets, tokenised deposits and wCBDC, while enabling industry participants to conduct end-to-end testing of tokenised asset transactions in practical business scenarios.

After thorough consideration of industry interest, prevailing market trends and potential innovative impact, the initial round of experimentation will cover tokenisation of both traditional financial assets and real-world assets, focusing on four main themes: fixed income and investment funds, liquidity management, green and sustainable finance, and trade and supply chain finance. The HKMA will continue to actively engage with the industry to gauge interest in tokenisation, develop new themes and identify further use cases for tokenisation.

Four main themes and their corresponding use case categories to be tested on the Project Ensemble Sandbox

Project e-HKD+

The HKMA has embarked on Project e-HKD since June 2021 to study the prospect of issuing an e-HKD for the use of individuals and corporates, covering both technical and policy considerations. In September 2024, the project has been renamed as Project e-HKD+, as the project expands its coverage from e-HKD only to a more comprehensive exploration of the digital money ecosystem. Under the e-HKD Pilot Programme, the HKMA works closely with the industry to explore different innovative use cases for new forms of digital money, including e-HKD and tokenised deposits, that can potentially be used by individuals and corporates.

The HKMA continues to actively engage the industry, academia and other stakeholders, as well as participate in international fora and monitor international developments on CBDC and other new forms of digital money. While the HKMA has not yet reached a policy decision on whether or when to introduce an e-HKD for the use of individuals and corporates, it will continue to advance the technology and legal groundwork to support its potential issuance in the future.

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HKMA’s Policy Stance on e-HKD

The HKMA conducted two rounds of market consultations on issuing an e-HKD, with one on high-level technical designs, and the other on key policy and design issues. The HKMA published a paper in September 2022 to provide its initial views on how to best position Hong Kong for future developments in the sphere of digital currencies and payments.

Technical Perspective

A technical whitepaper titled “e-HKD: A technical perspective” was published in October 2021 to explore potential technical design options for issuing and distributing a retail CBDC. This whitepaper builds on the model for a retail CBDC as jointly investigated by the HKMA and the BISIH Centre in Hong Kong. It is the first among similar papers published by central banks to unveil a technical architecture that includes a ground-breaking privacy preservation arrangement that allow transactions to be traced in a privacy-amicable manner.

e-HKD: A technical perspective

Policy and Design Perspective

A discussion paper titled “e-HKD: A Policy and Design Perspective” was published in April 2022. It discusses the potential benefits and challenges of an e-HKD, various design considerations (e.g. issuance mechanism and legal considerations), as well as the potential use cases for an e-HKD.

e-HKD: A Policy and Design Perspective

Policy Stance and Three-Rail Approach

Taking into account the findings of the study and the feedback received from these two rounds of market consultation, the HKMA published a position paper titled “e-HKD: Charting the Next Steps” in September 2022 to set out its policy stance on an e-HKD. The paper outlined a three-rail approach that will be adopted to pave the way for the possible implementation of an e-HKD in Hong Kong.

e-HKD – Charting the Next Steps

Three-rail approach for the potential implementation of an e-HKD:

Rail 1 aims to lay the technology and legal foundations for supporting the future implementation of an e-HKD.

Rail 2 runs in parallel to Rail 1, and takes deep dives into potential use cases, and implementation and design issues relating to an e-HKD. In particular, the e-HKD Pilot Programme was launched in November 2022 as a joint effort between the HKMA and the industry to explore and evaluate the commercial viability of potential use cases for an e-HKD as well as to gain actual experience, through a series of pilots conducted with the industry.

Rail 3 will consolidate the outcomes of Rail 1 and Rail 2 for more thorough implementation planning, and will set the timeline for launching an e-HKD. The progress of Rail 3 will depend on the actual progress made under Rail 1 and Rail 2, as well as the pace of relevant local and international market development. The HKMA has not yet reached a policy decision on whether or when to introduce an e-HKD.
e-HKD Pilot Programme Phase 1

The HKMA launched the e-HKD Pilot Programme, a key component of Rail 2, in November 2022. The HKMA has also developed an e-HKD Sandbox to enable participants of the e-HKD Pilot Programme to accelerate their prototyping, development and testing of their use cases, as well as to gain actual experience.

Phase 1 of the e-HKD Pilot Programme commenced in May 2023, and took deep dives into potential domestic and retail use cases in six categories: full-fledged payments, programmable payments, offline payments, tokenised deposits, settlement of Web3 transactions, and settlement of tokenised assets. 16 firms from financial, payment and technology sectors were selected to participate.

The HKMA published the “e-HKD Pilot Programme Phase 1 Report” in October 2023 to discuss the key findings, learnings, and the HKMA’s assessment of the conducted pilots. The pilots showed that there were three areas where an e-HKD could potentially add unique value to the current ecosystem, namely: programmability, tokenisation, and atomic settlement. The HKMA recognises that these pilots were conducted on a small scale within a controlled environment. Therefore, further investigation and evaluation would be required to determine if these benefits can be realised at a larger scale in real-life applications.

e-HKD Pilot Programme Phase 1 Report

e-HKD Pilot Programme Phase 2

The HKMA launched Phase 2 of the e-HKD Pilot Programme (Phase 2) in March 2024, inviting industry participants to submit innovative use cases of digital money for the use of individuals and corporates. Phase 2 will explore the commercial feasibility, within a real-world setting, of e-HKD and compare different forms of digital money to evaluate whether there is incremental value in e-HKD as compared with privately issued digital money such as tokenised deposits. The outcomes of Phase 2 of the programme will help the HKMA understand the practical issues associated with designing, implementing and operating a future-proof digital money ecosystem.

Phase 2 commenced in September 2024. A total of 11 groups of firms from various sectors have been selected to conduct pilots to explore innovative use cases across three main themes, namely settlement of tokenised assets, programmability and offline payments. Phase 2 is expected to last for around a year. The full list of selected participants and pilots is set out below.

Themes*	Participants and use cases
Settlement of tokenised assets	Hang Seng Bank, Aptos Labs and Boston Consulting Group (BCG) will test the commercial value of settling a tokenised fund using digital money on a public blockchain.
	HSBC will test how digital money can operate securely on permissioned protocols on public distributed ledger technology (DLT) environments for storing and transferring value, potentially serve as a settlement utility for tokenised assets, and address privacy concerns.
	Standard Chartered, BlackRock, Mastercard and Liberea will adopt an end-to-end approach in their test to enable bank customers to conduct tokenised fund transactions using digital money and to allow asset managers to perform efficient and secure tokenised money settlement.
	Visa, ANZ, Fidelity International and ChinaAMC (HK) will explore near-real time settlement for interbank transfers and cross-border payments, as well as Delivery vs Payment (DvP), through e-HKD and tokenised deposits, facilitating Australia-based corporate investors’ purchases of tokenised fund units offered by asset management companies in Hong Kong.
Programmability	Bank of China (Hong Kong) is establishing the e-HKD infrastructure based on a consortium blockchain network, and joining hands with Sanfield (Management) Limited and other collaborative partners to create on-chain smart contracts for the effective applications of dedicated fund mechanism and prepayment scenario.
	China Construction Bank (Asia) will test the implementation of programmable prepayment to merchants at scale, assessing different blockchain infrastructure designs for the potential implementation of e-HKD.
	DBS will explore the use of digital money to enable a scalable ESG reward platform through driving adoption of purpose bound money.
	Hang Seng Bank will test how a digital money can enable the development of a next-generation digital reward platform that is open, efficient and scalable.
	Mastercard, Kasikornbank (KBank) and Airstar Bank will explore the use of digital money to facilitate both domestic and international trade finance.
Offline payments	Bank of Communications (Hong Kong) and China Mobile (Hong Kong) will test the use of e-HKD stored in a mobile SIM card to enable e-HKD offline payments and transfers.
Offline payments	ICBC (Asia) will explore an anonymous e-HKD wallet and test the use of e-HKD to enable dual offline payments.

*Some use cases may potentially fit into more than one theme.

Similar to Phase 1, an e-HKD sandbox will be made available to pilot participants to accelerate their prototyping, development and testing of use cases.

e-HKD Industry Forum

As part of Project e-HKD+, the HKMA has established the e-HKD Industry Forum (Forum). This Forum serves as a collaborative venue for participants to discuss common issues, such as industry standards, regulatory guidance and financial infrastructure, that are crucial to the scalability and possible implementation of new forms of digital money. Under the Forum, industry-led working groups will be established to make recommendations on specific topics, with an initial focus on programmability.

Initial participants of the Forum will primarily be firms that have participated in the e-HKD Pilot Programme. The HKMA will review the size and composition of the Forum as and when deemed appropriate.

Industry publications under the e-HKD Pilot Programme

e-HKD and the Future of Global Money Movement (Published in July 2024)	Reimagining a Future Empowered by e-HKD, Tokenised Deposits and Stablecoins (Published in March 2024)	Settlement of Tokenised Assets with Hypothetical e-HKD White Paper (Published in March 2024)
Settlement of Tokenised Assets with Hypothetical e-HKD Design Paper (Published in March 2024)	Programmable Payment and Investment: Cash Management for Low Balance Retail Investors (Published in March 2024)	Envisioning Programmable Payments in Hong Kong (Published in December 2023)

Note: While the reports may have incorporated inputs from the HKMA, any position taken or statements made by the author(s) of these reports may not necessarily represent the views of the HKMA, and accordingly should not be interpreted as positions or statements which have been endorsed by the HKMA.

Collaborative Projects

Project Aurum

In relation to retail CBDCs, the HKMA previously collaborated with the BISIH Centre in Hong Kong and the Hong Kong Applied Science and Technology Research Institute on Project Aurum to create a prototype two-tier CBDC system. This project was the BISIH’s first retail CBDC project, and it studied the high-level technical design for a retail CBDC. Project Aurum resulted in the creation of a prototype two-tier CBDC system, which comprised a wholesale interbank system and a retail e-wallet system. A report was published in October 2022.

This project laid a solid foundation for the HKMA’s subsequent retail CBDC projects (such as Project Sela), and also helped shed light on the CBDC journey for other central banks by making the source code and technical manuals accessible to all central banks.

Project Aurum: A Prototype for Two-tier Central Bank Digital Currency (CBDC)

Project Sela

The HKMA collaborated with the Bank of Israel and the BISIH Centre in Hong Kong on Project Sela. This project was a joint experiment testing the feasibility of a retail CBDC architecture in promoting competition and innovation in digital payments amongst private sector intermediaries, with analysis in the areas of policy, cybersecurity, legal and technology. The proposed architecture, established as a proof of concept, allowed such intermediaries to connect directly to the CBDC ledger of the central bank. A report was published in September 2023.

This project demonstrated that the proposed architecture could feasibly promote competition and innovation in digital payments, whilst attaining desirable levels of access and cybersecurity. In addition, it demonstrated that public-private partnerships could support the development of a vibrant ecosystem of private sector intermediaries.

Project Sela: an accessible and secure retail CBDC ecosystem

CBDC Expert Group

The HKMA established the CBDC Expert Group in October 2023 to foster collaboration and knowledge exchange on CBDC research with the academia. The group brings together experts from a range of disciplines, including business, computer sciences, economics, finance, and law, who will support the HKMA's exploration of key policy and technical issues surrounding CBDCs. The group is also intended to facilitate collaboration between the government, industry and academia in CBDC research.

The group has commenced work on a number of research papers. The inaugural paper discusses privacy issues pertaining to CBDCs. It examines the efficacy of different types of privacy-enhancing technologies. The second paper discusses the interoperability of CBDCs, and examines the viability of blockchain technologies and related standards in facilitating compatibility between different CBDC implementations. Further information on such papers will be published in due course.

List of CBDC Expert Group members

University	Faculty	Member
The Chinese University of Hong Kong	CUHK Business School	Professor Seen-Meng CHEW
The Chinese University of Hong Kong	Faculty of Engineering	Professor CHAN Chun-kwong
City University of Hong Kong	College of Engineering	Professor WANG Cong
The Hong Kong Polytechnic University	Faculty of Engineering	Professor Allen AU Man-ho
The Hong Kong Polytechnic University	Faculty of Engineering	Professor Daniel LUO Xiapu
The Hong Kong University of Science and Technology	HKUST Business School	Professor TAM Kar-yan, MH, JP
The Hong Kong University of Science and Technology	HKUST Business School	Professor Allen HUANG Hao
The University of Hong Kong	Faculty of Engineering	Professor YIU Siu-ming
The University of Hong Kong	Faculty of Engineering	Dr John YUEN Tsz-hon
The University of Hong Kong	Faculty of Law	Professor Douglas ARNER
The University of Hong Kong	HKU Business School	Professor LIN Chen
The University of Hong Kong	HKU Business School	Dr YOU Yang

Related Information

Press Release(s)

Speech(es)

inSight Article(s)

Quarterly Bulletin Article(s)

Last revision date : 25 October 2024

Central Bank Digital Currency (CBDC)

Project Ensemble Architecture Community