Hong Kong unveils accomplished retail CBDC undertaking that has a CBDC-backed stablecoin

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The Hong Kong Financial Authority offered its accomplished Aurum retail central financial institution digital forex (CBDC) prototype on Oct. 21. The system, developed at the side of the Financial institution for Worldwide Settlements (BIS) Innovation Hub, has a novel construction that displays the intricacies of the present system for issuing cash in Hong Kong.

Aurum consists of a wholesale interbank system and retail e-wallet. The e-wallet is created at an area financial institution and has a smartphone interface. A validator system prevents financial institution over-issuance and consumer double redemption.

The intermediated retail CBDC is used within the e-wallets, and CBDC-backed stablecoins are used within the interbank system. The bizarre CBDC-backed stablecoins digitally mirror Hong Kong’s present forex system, through which financial institution notes are issued by three monetary establishments and backed by the central financial institution. The CBDC is a direct legal responsibility of the central financial institution, whereas the stablecoins are liabilities of the issuing financial institution, with backing property held by the central financial institution. The authors stated:

“Bringing CBDC-backed stablecoins to life has by no means been finished earlier than and we due to this fact felt that doing so might complement the rising physique of analysis on non-public sector stablecoins. Certainly, what distinguishes Aurum from non-public sector stablecoins is that Aurum’s stablecoin balances are reconciled, versus actual time gross settlement (RTGS) balances of the issuing financial institution with the central financial institution.”

The excessive degree of decoupling between the wholesale and retail ledgers provides the system a excessive degree of cyber-resilience, the designer mentioned.

Retail transactions are carried out with aliases. Solely the middleman that performs Know Your Buyer features can see the id of customers. Unspent transaction output information are used to trace digital forex possession anonymously by means of a number of transactions as a security measure in case of business financial institution chapter.

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Hong Kong launched its CBDC research in June 2021 as a part of its complete Fintech 2025 Technique. The financial authority is pursuing retail and wholesale CBDC implementation individually. It famous earlier that the retail CBDC has no “imminent role” to play within the funds market, however use instances might emerge shortly. Aurum is the primary undertaking accomplished by the BIS Innovation Hub.