Hong Kong central bank forms community to explore assets tokenization

Regulators like HKMA and SFC united with local private sector firms like HSBC and HashKey to support the market of tokenization in Hong Kong.

The Hong Kong Monetary Authority (HKMA), the financial regulator and central bank of Hong Kong, is collaborating with the industry to explore asset tokenization.

HKMA officially announced on May 7 that it will form a special community comprising industry representatives and regulators to develop tokenization standards.

Called “Project Ensemble Architecture Community,” the community aims to supervise and support the development of tokenization projects in Hong Kong.

The initiative is also designed to promote and support interoperability among wholesale central bank digital currencies (wCBDC) — a type of digital money used among banks and financial institutions.

According to the announcement, the community will initially focus on establishing a mechanism to support seamless interbank settlement of tokenized deposits through wCBDC for tokenized asset transactions.

At launch, the Project Ensemble Architecture Community will comprise regulators like HKMA, Hong Kong’s Securities and Futures Commission, the BIS Innovation Hub Hong Kong Centre, and the CBDC Expert Group.

The private sector is represented by seven members, including Bank of China (Hong Kong), Hang Seng Bank, HSBC, Standard Chartered Hong Kong, HashKey Group, Ant Digital Technologies and Microsoft Hong Kong.

Together, the companies and authorities are expected to design and launch the Project Ensemble Sandbox, which is targeted to launch around mid-2024 to facilitate further research and testing of tokenization use cases.

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“The formation of the Community is based on a range of careful considerations, including the members’ expertise in contributing to the development of the tokenization market in Hong Kong, experience and competency in relevant fields and innovative capability,” HKMA said in the announcement, adding:

“The HKMA will be working closely with the industry, and review the size and composition of the Community as and when deemed appropriate.”

HKMA’s announcement comes a few months after the authority first disclosed its Project Ensemble to support the development of the Hong Kong tokenization market.

Tokenization is the process of issuing a digital representation of real-world things such as fiat currencies, equity, commodities, real estate and others. Blockchain-based real-world tokenization (RWA) has emerged as one of the key trends in 2024 as investors look for new ways to diversify their portfolios.

According to some forecasts, RWA tokenization could potentially revolutionize multiple industries and grow into a $16 trillion market by 2030.