Project Ensemble to boost Hong Kong tokenization efforts

Hong Kong’s central bank has launched the Project Ensemble sandbox to support the state’s tokenization efforts, with Microsoft (NASDAQ: MSFT), HSBC (NASDAQ: HSBC), and Standard Chartered (NASDAQ: SCBFF) as some of the participants.

The Hong Kong Monetary Authority (HKMA) revealed at the launch ceremony that the sandbox would contain four main themes:

• Fixed income and investment funds.
• Liquidity management.
• Green and sustainable finance.
• Trade and supply chain finance.

HKMA, the city-state’s de facto central bank, announced Project Ensemble earlier this year, revealing that it would focus on a wholesale central bank digital currency (CBDC) as the basis for tokenization in interbank settlements.

“The introduction of the Project Ensemble Sandbox to test tokenisation use cases marks a significant step forward for the HKMA and the industry to explore the application of tokenisation in real-life business scenarios,” commented Eddie Yue, the HKMA CEO.

At this week’s event, the central bank revealed that the sandbox would facilitate these settlements using experimental tokenized money. The participating banks have each developed a tokenized deposit platform, which they have then connected to the sandbox, “paving the way to conduct experiments for both interbank payment-versus-payment and delivery-versus-payment settlement.”

Under fixed income and investment funds, HKMA intends to push for the tokenization of bonds and funds; both markets typically take up to five days to settle transactions. Tokenized versions can settle almost instantly, and the risk is mitigated with delivery-versus-payment. They can also be settled around the clock and with much greater transparency, boosting the market.

HSBC, Ant Group, Standard Chartered spearhead sandbox

HSBC is one of the institutions leading this initiative. The bank, the largest in Hong Kong, has already completed three proof-of-concept use cases as part of Project Ensemble. This included the issuance and sale of digital bonds through tokenized deposits. It also facilitated the transfer of tokenized deposits to Hang Seng Bank (NASDAQ: HSNGY), another participant in Ensemble.

Ant International, the Singapore-based fintech subsidiary of the Chinese behemoth, also participates in the sandbox under the liquidity management theme. The company is leveraging its blockchain-based Whale treasury management solution to build a global liquidity management solution that allows participating banks to exchange their tokens in real time.

Another Ant Group subsidiary, Ant Digital Technologies, will participate under the green and sustainable finance theme. In one application, Chinese firm Longshine Technology tokenized over 9,000 of its charging piles on Ant Digital’s infrastructure as part of Ensemble.

“Looking ahead, we hope to provide support to more RWA projects, especially in the new energy sector, both in China and globally. We also welcome partners to explore more use cases in the real economy with us,” commented Ant Digital CEO Zhao Wenbiao.

Project Ensemble’s fourth theme of trade and supply chain finance has brought together Hang Seng Bank, HSBC, and StanChart as the financiers, with Microsoft and Ant Digital providing the tech.

In one use case, the partners successfully tested the interbank transfer of tokenized deposits from HSBC to Hang Seng to settle electronic bills of lading. The Global Shipping Business Network (GSBN), an industry body whose members include Hapag-Lloyd and Singapore’s port operator PSA International, also participated.

“The tokenization of the eBL, a critical document underpinning global trade and serving as a means of legally transferring the title of goods, will for the first time pave way to the securitization of global physical shipping flows,” GSBN said in a statement shared with the media.

The Hong Kong Securities and Futures Commission (SFC) is also involved in the sandbox to offer regulatory clarity to the participants.

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