Hong Kong Monetary Authority On Launching Its CBDC Prototype “Aurum”

The Hong Kong Monetary Authority has recently launched a central bank digital currency (CBDC) prototype called “Aurum”. In line with the partnership with the Bank for International Settlements (BIS) Innovation hub, Aurum was created with a unique structure that reflects the complexity of the current system for issuing money in Hong Kong. 

Aurum is considered a retail e-wallet and wholesale interbank system. As it was created in a local bank and had a smartphone interface, its validator system would prevent bank over-issuance and double user redemption. CBDC-backed stablecoins are used in an interbank system while intermediated retail CBDC is used in the e-wallets.

It appears that Hong Kong began its research on CBDC in June 2021 as part of its comprehensive Fintech 2025 strategy. They have been pushing for the retail and wholesale CBDC implementation separately. Currently, retail transactions are done with aliases. The negotiator who runs the Know Your Customer (KYC) functions have an access to the user identities. Any transactions on the output records that weren’t spent are used to track digital currency ownership anonymously through multiple transactions to ensure safety in case of commercial bank bankruptcy.

Hong Kong is one of the major financial centers in the world and they have been expanding its efforts to draw level with others when it comes to CBDC development. Mainland China had already been expanding the digital yuan (e-CNY) and issued its own CBDC in March 2021. So far, Aurum is the first project completed by the BIS Innovation Hub.