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Ripple to Demo Tokenized Real Estate Solution for Hong Kong CBDC Pilot

The Hong Kong Monetary Authority launched its e-HKD Pilot Programme last Thursday. The scheme will involve 16 firms from the finance, payments and technology sectors, including Ripple, which will showcase a real estate tokenization solution.

Last Thursday saw the Hong Kong Monetary Authority (HKMA) officially launch its eHKD Pilot Programme in collaboration with 16 firms covering the finance, payments and technology sectors.

The scheme forms a significant part of the second rail in the HKMA’s three-rail approach to the potential implementation of a retail central bank digital currency (CBDC). Rail 1 dealt with the technological and legal foundations of the eHKD, while Rail 3 will develop a process towards launch.

The programme will consist of a series of pilot projects that thoroughly explore six categories of potential CBDC use: full-fledged payments, programmable payments, offline payments, tokenized deposits, Web3 settlement and tokenized asset settlement. Feedback from the project will be used to advise further pilot schemes in the future and ultimately feed into the final decision on whether to launch the e-HKD.

“While the HKMA has not yet made a decision on whether and when to introduce e-HKD, we are excited to kick-start the e-HKD Pilot Programme, which serves as a tremendous opportunity for the HKMA to collaborate with the industry in exploring innovative use cases and maximising our readiness for a potential e-HKD.” - Eddie Yue, HKMA Chief Executive

All three of Hong Kong’s note-issuing lenders (HSBC, Standard Chartered Bank and Bank of China) will take part in the programme, with the largest, HSBC, set to be involved in two pilots: e-HKD retail payments on the Hong Kong University of Science and Technology campus, and tokenized deposit transactions working alongside Visa.

One of the firms that will be working closely with the HKMA is Ripple, although the e-HKD will not be built using the company’s recently enhanced CBDC platform. Instead, Ripple will provide a real estate asset tokenization solution alongside local partner Fubon Bank.

This will be run on a private and secure ledger built using the same technology as the XRP Ledger. The solution will combine e-HKD, tokenization and lending protocols to facilitate the fast and efficient release of equity built up in private real estate.

For many people, their primary home is a key element of their overall wealth portfolio, with a value which tends to increase over time. However traditional methods for unlocking this additional equity can be long and expensive, and Ripple intends to showcase a much-improved solution, as Vice President of Central Bank Engagements & CBDCs, James Wallis explains:

“We now have the opportunity to demonstrate how real estate asset tokenization could be brought to the citizens of Hong Kong, and are confident that our fully integrated solution will be an industry-first use case demonstrating the power of leveraging a CBDC for real estate equity asset release.”

It looks like Hong Kong has really given its Pilot Programme some serious consideration, and whether the e-HKD eventually becomes a reality or not, it could still produce some innovative blockchain-based solutions to legacy systems and processes.

With a findings report due in November, we‘ll be Observing this one very closely indeed.