Eddie Yue: Opening remarks - launch ceremony for Project Ensemble
Sandbox
Opening remarks by Mr Eddie Yue, Chief Executive of the Hong Kong Monetary
Authority, at the launch ceremony for Project Ensemble Sandbox, Hong Kong, 28
August 2024.
* * *
Good afternoon everyone, and a warm welcome to you all to the launch ceremony of
the Project Ensemble Sandbox. Today's event marks a significant milestone in our
journey towards creating a dynamic and innovative digital asset ecosystem in Hong
Kong.
I don't think it's an overstatement to say that we are living through a transformative era
in the financial industry. The rise of digital money and new technologies is reshaping
the financial landscape. The central bank community has responded with its own
innovation efforts around central bank digital currencies, or CBDCs, which have the
potential to underpin the new digital economy.
Since 2017, the HKMA has been at the forefront of research and innovation on CBDCs,
with projects like mBridge, which has recently reached the Minimum Viable Product
(MvP) stage, and e-HKD, which will commence its Phase 2 Pilot Programme shortly.
But we recognise that CBDCs will not, and should not, be the only force driving
innovation. Tokenisation, which like CBDCs often rides on blockchain technology, also
provides the foundation for innovative pilots looking at how financial transactions can be
conducted through the tokenisation of commercial bank money and both financial and
real-world assets. Tokenisation has the potential to make financial transactions more
efficient, more transparent and less costly, and may represent the future of finance.
Today, I would like to outline the role that the Ensemble Sandbox is intended to play
within the HKMA's broader vision of cultivating a dynamic digital asset ecosystem in
Hong Kong.
Project Ensemble
We launched Project Ensemble in March this year with the aim of supporting and
advancing the development of the tokenisation market in Hong Kong.
At the core of Project Ensemble are two key elements: collaboration and the sandbox.
As the establishment of the Architecture Community shows, the Project brings together
industry participants, regulators and innovators to shape the future of digital
assets. Meanwhile, the Ensemble Sandbox is a new financial market infrastructure that
facilitates the full life cycle of a tokenised asset transaction: from the creation and
trading of tokenised assets, through payment and settlement using tokenised
commercial-bank deposits, to final interbank settlement through CBDC issued by the
HKMA.
The Sandbox serves four major purpose:
a. First, it enables industry participants to explore the use case for tokenised assets
in a controlled environment;
b. Second, it allows industry participants to test and review the technical
compatibility among digital assets, tokenised deposits and CBDCs;
c. Third, the technical parameters and design protocols of the pilot use case will
serve as important inputs in setting common industry benchmarks for
tokenisation; and
d. And finally, it promotes innovative use cases that contribute to resolving pain
points in financing the real economy, including in supply chain financing.
The Sandbox will also cover cross-border payment functionalities. In relation to this, I
would like to highlight our recent collaboration with the Banque de France, where our
Sandbox and their equivalent system have been successfully connected. Pilots have
been done to demonstrate that atomic cross-border settlement can be performed
through the linked systems. Under the MoU signed between the two institutions, we will
continue to experiment with innovative cross-border pilots in CBDCs and tokenisation.
Central banks are well positioned to lay the foundations for the tokenisation ecosystem.
But for the trend to take off, we need industry innovators to actively participate, to try
out new use cases, and to assess their commercial viability and scalability. We need to
get into this together. Our theme today - "Tokenising Together, Today and Tomorrow"
or four "T"s as our team calls it - is more than just a slogan. It embodies the essence of
Project Ensemble, and represents a strategic path for collaboration. Allow me to
elaborate on how we plan to put these four "T"s into action.
Tokenising Together
"Tokenising Together" captures the spirit of "co-creation", which is central to Project
Ensemble. The word "Ensemble" indicates cohesion and unity, which reflects our wish
to unite industry efforts to push forward Hong Kong's tokenisation market. In fact, the
participation of so many of you today is a clear example of how such an "Ensemble" is
already being brought to life.
Since the establishment of the Architecture Community in May, we have been working
closely with Community members to co-develop the Sandbox architecture and
interoperability standards, which are foundational to the successful launch of the
Sandbox.
I would like to congratulate all our banks in the Architecture Community on successfully
integrating their tokenised deposit infrastructure with the Sandbox, paving the way for
payment-versus-payment (PvP) and delivery-versus-payment (DvP) experiments in the
coming months.
Beyond the Sandbox's evolution, Project Ensemble has also drawn the attention of a
broad spectrum of stakeholders from the finance and tech areas, including central
banks, financial entities, tech corporations, and local startups. Within just five months,
we have seen a wave of enthusiastic feedback suggesting innovative use cases that
promise to address many of the current operational challenges in finance and trade.
Among these use cases, those involving the tokenisation of investment assets are of
particular interest. And here I would like to express our appreciation of the SFC's
support in reviewing the legal and regulatory frameworks for asset tokenisation, which
has been essential to our tokenisation efforts. I would like to thank Julia and her team
for their support and look forward to her sharing in a moment.
Tokenising Today
Let me now turn to the notion of "Tokenising Today". As we embark on a journey that
could make transformative changes for the future, it is essential to take decisive steps
today.
The launch of the Sandbox is a significant step forward towards harnessing the power
of blockchain technology and smart contracts. We see the Sandbox as a pioneering
financial infrastructure and a collaborative platform to test and refine different use
cases, covering areas ranging from fixed income and investment funds, liquidity
management, green and sustainable finance, to trade and supply chain finance.
But the potential of the Sandbox extends far beyond these initial applications. It is
designed in a way that will enable it to support various forms of digital money and digital
assets, and ensure seamless integration with other financial infrastructures in the future.
Tokenising Tomorrow
And this brings me to the notion of "Tokenising Tomorrow". Our actions today are
guided by the vision of cultivating a vibrant digital asset ecosystem in Hong Kong. The
pilots under the Sandbox are just the beginning. We envision a future where these
initiatives evolve into tangible real-life applications that will potentially transform our
financial landscape. In order to prepare for this early, we are already actively working
to evolve the Sandbox into a robust, production-ready financial infrastructure that will
support real-money tokenised transactions in Hong Kong in the future.
Over the years, the HKMA has built an efficient multi-currency platform with extensive
domestic and overseas linkages, which has proved essential to growing our global
financial business and underscores our legacy of innovation in financial infrastructures.
However, to remain competitive in an ever-evolving landscape, we must continuously
build upon this rich heritage.
As financial technology takes centre stage in the future of finance, we invite you to join
us in showcasing Hong Kong's innovative mindset and ability to conduct pioneering
work in the tokenisation market. By doing so, we not only reinforce Hong Kong's status
as a premier international financial centre, but also create an environment for new
business opportunities, talent and expertise. Our commitment to innovation will
continue to draw global players and skilled professionals to our city, fostering a vibrant
digital asset ecosystem. Together, we can position Hong Kong as a leader in the
financial technology revolution, ensuring that we remain at the forefront of the global
financial landscape.
Thank you.