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

The Banque de France (BDF) and the Hong Kong Monetary Authority (HKMA) have signed a Memorandum of Understanding (MoU) focused on bilateral cooperation in the realms of wholesale central bank digital currency (CBDC) and tokenization.

The HKMA has expressed its intention to explore interoperability between their CBDC infrastructures and enhance cross-border transaction settlement efficiency, as stated in an official statement.

The BDF has already established the DL3S infrastructure, which serves as a foundation for the introduction of a CBDC.

Meanwhile, the HKMA will leverage its Project Ensemble sandbox for research purposes.

Project Ensemble to Study Asset Tokenization

Project Ensemble, initiated by the HKMA in March, is aimed at studying asset tokenization and developing a CBDC to support such initiatives.

This endeavor has brought together various stakeholders, including regulators from the Architecture Community of Hong Kong, the Bank for International Settlements (BIS), major local banks, HashKey crypto exchange, Ant Digital Technologies, and Microsoft Hong Kong.

The project is set to commence research and testing in the coming months.

Denis Beau, the First Deputy Governor of the BDF, expressed his enthusiasm for the collaboration, stating that the timing aligned well with the HKMA’s recent announcement regarding Project Ensemble.

He further mentioned the BDF’s eagerness to conduct further testing of their DL3S platform within this cooperative framework.

It’s worth noting that the HKMA and BDF are already participating together in other projects.

The HKMA recently joined the second wave of participants in the European Central Bank’s distributed ledger technology testing, focusing on interoperability among blockchain modules for the settlement of tokenized government bonds.

Furthermore, the BDF is an observer in Project mBridge, the largest CBDC-related project to date, and the HKMA is one of its original participants.

Hong Kong’s CBDC, known as the e-HKD, has been under development since 2021 and is currently in the second phase of its pilot testing.

The HKMA has been actively involved in researching various CBDC applications, including testing a retail e-HKD with a complex structure alongside the BIS in Project Aurum.

Additionally, the HKMA has engaged in collaborations with BIS and the United Nations for the development of tokenized “green” bonds, as well as partnerships with Ripple and Visa to explore real estate tokenization.

Tokenized Assets to Reach $2 Trillion by 2030

Tokenized financial assets are poised to achieve a market size of approximately $2 trillion by 2030, according to analysts at consulting firm McKinsey & Company.

They even suggest a bullish scenario where the market value could double to around $4 trillion, although they remain slightly less optimistic than before.

Notably, tokenized treasuries have seen remarkable expansion as yields remain high in an environment of elevated inflation and interest rates in the United States.

The RWA.xyz platform reported a record $1.29 billion locked in tokenized U.S. treasuries and bonds, representing an 80% surge since the beginning of 2024.

Protocols such as Securitize and Ondo have contributed heavily to this growth.

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