Hong Kong eyes tokenization; Bolivia offers stablecoin custody

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Hong Kong has announced two new partnerships with the central banks of Brazil and Thailand to explore the application of tokenization in cross-border initiatives.

The two partnerships are part of Project Ensemble, an initiative the Hong Kong Monetary Authority (HKMA) launched in March to explore a wholesale central bank digital currency (CBDC) and tokenization in the city-state. The central bank followed this up with the launch of the Ensemble Sandbox in August to further support tokenization in the city, with (NASDAQ: MSFT) and HSBC (NASDAQ: HSBC) joining the first cohort of participants.

This week, the HKMA announced that it had partnered with Banco Central do Brasil (BCB) to conduct cross-border tokenization experiments. BCB will link its experimental CBDC, dubbed Drex, to the Ensemble Sandbox platform to explore cross-border payment-versus-payment (PvP) and delivery-versus-payment (DvP). PvP is used in foreign exchange, while DvP is used in securities trading; both reduce counterparty risk.

The partnership allows Hong Kong to tap into one of the most anticipated CBDC projects globally: Drex. Brazil has been wildly successful with its instant payment system Pix, and many are eager to see if this success can be translated to Drex. 

“The collaboration with the HKMA is an important step of this new phase in the construction of Drex,” commented Roberto Campos Neto, the BCB Governor.

“Participating in cross border experimentation and debates is fundamental to help in the creation of an even better integrated global financial market. Thus, we consider to be symbolic the connection of two jurisdictions on opposite sides of the globe.”

His Hong Kong counterpart, Eddie Yue, commented that the partnership aligns with Project Ensemble’s collaboration theme. The two central banks “share a common vision of driving the future of the financial industry through technology.”

The HKMA has also partnered with the Bank of Thailand (BOT) on a similar PvP and DvP project, targeting sectors like carbon credits and trade payments. The two banks will develop new DLT-integrated financial market infrastructures and link them to Project Ensemble and Thailand’s Project San, a new initiative the BOT launched in June to develop a prototype for the tokenization ecosystem.

 “This partnership will significantly advance tokenisation efforts in our financial sectors, both domestically and cross-border, by offering broader insights into tokenisation, as different technical designs, business requirements, and regulatory frameworks of each jurisdiction will be taken into account,” commented BOT Deputy Governor Alisara Mahasandana.

The BOT and HKMA have been fintech partners for years. Some of their most notable joint projects include Project Inthanon-LionRock and Project mBridge. The former focused on cross-border transfers powered by DLT, while the latter was a joint CBDC initiative that also involved China and the United Arab Emirates.

The new partnerships cement HKMA’s position as the global pioneer in cross-border DLT solutions. This year, the central bank partnered with the French central bank to explore the role of wholesale CBDCs in cross-border payments. 

Bolivian bank launches stablecoin support

In South America, a Bolivian bank has announced the integration of USDT, allowing customers seamless access to the Tether-issued stablecoin.

Banco Bisa, one of Bolivia’s largest lenders, now offers USDT custody to clients, allowing them to purchase, sell, hold and transfer the stablecoin. According to Franco Urquidi, the bank’s vice president of business, the integration enables cheap and fast transfers across borders.

Globally, financial regulators have been reluctant to permit digital asset payments, citing risks of money laundering and other financial crimes. Urquidi revealed that Banco Bisa is limiting the potential for fraud through a stringent KYC process.

“Our clients go through a rigorous verification process, which gives them the peace of mind that their transactions are carried out through secure and reliable channels,” he stated.

The product has received the green light from the country’s financial regulator, the Financial System Supervision Authority. Director Yvette Espinoza lauded the lender for its pioneering product, which she says is being offered within the limits of a regulatory framework that guarantees users’ security.

“This is a custody service that will allow clients to carry out various operations safely, reducing the risk of unsafe interactions in the cryptocurrency market,” she commented.

Banco Bisa joins dozens of other global lenders integrating stablecoins for cost-effective and fast cross-border transactions. However, most have steered clear of popular stablecoins like the crime-ridden USDT and have chosen to issue their own compliant tokens.

Last December, French giant Société Générale became the first big global bank to issue its own stablecoin. Known as the EUR CoinVertible and fully backed by euros in reserve, it was availed for trading on the Bitstamp exchange.

Most recently, Thai lender Siam Commercial Bank launched its stablecoin for cross-border payments and remittances. In addition to lowering costs and boosting speed, Siam touted the stablecoin’s 24/7 availability as a significant advantage over its existing cross-border solutions.

Watch: CBDCs are more than just digital money