The Bank of East Asia (BEA) in Hong Kong recently conducted a proof of concept (PoC) for issuance of a stablecoin using the Universal Digital Payments Network (UDPN). We tested both stablecoin issuance and redemption (minting and burning) and trialled a mobile application for our clients.
Currently, most of the use of stablecoins takes place in the cryptocurrency world or jurisdictions where consumers want access to dollars. One of the reasons stablecoins have not become mainstream is due to a lack of infrastructure. However, the situation is changing, meaning that stablecoins will increasingly compete, especially from cross-border bank payments. Banks are not silent. They are participating in tokenized deposit trials with multiple banks and issuing their own tokenized deposits or stablecoins.
UDPN is a multifaceted project that supports the issuance of stablecoins and tokenized deposits, as well as providing an interoperability layer between various digital currencies, including central bank digital currencies (CBDCs).
“Through our PoC with UDPN, we were able to gain insight into global practices regarding central bank digital currencies (CBDCs) and stablecoin mechanisms,” said BEA’s Group CIO and General Manager, Technology Productivity. said Division Director Stephen Leung.
“Experiments were conducted on stablecoin issuance and transfer and exchange between CBDCs and stablecoins. Cross-chain interoperability was also investigated between stablecoins and digital currencies on different blockchains. This has laid an important foundation for possible future partnership opportunities.”
Earlier this year, the bank participated in a DLT repo transaction with HSBC over digital green bonds issued by Hong Kong.
UDPN was founded by Red Date Technology, co-founder of China’s Blockchain-Based Service Network (BSN) and the international BSN Spartan Network. The development partner is GFT Consulting Company. It launched a sandbox for banks earlier this year.
Hong Kong digital currency activity
Meanwhile, the Hong Kong Monetary Authority (HKMA) operates at least three digital currency sandboxes, but this PoC was not one of them. The HKMA recently announced the expansion of its retail CBDC sandbox to include tokenized deposits. Additionally, we have a sandbox for stablecoins and a sandbox for institutional use of wholesale CBDCs that are part of Project Ensemble.
If you are interested in bank-issued stablecoins and tokenized deposits, an early access version of the report is available now.
