Hong Kong Monetary Authority Establishes Important Collaborations for CBDC Trial

• As all transactions are settled on the central bank’s balance sheet, credit risk is removed.
• This innovative arrangement will foster creativity, competition, and enhanced service delivery.

To assess the feasibility of a CBDC, the Hong Kong Monetary Authority (HKMA), the Bank for International Settlements (BIS) Hong Kong Centre, and the Bank of Israel (BOI) have joined forces. Project Sela aims to establish a robust, decentralized, and reliable CBDC (rCBDC) ecosystem that prioritizes privacy and security.

The initiative is exploring the distribution of responsibilities among the private sectors. In this suggested framework, sector intermediaries would manage customer-facing services and regulatory compliance, while the central bank would oversee the ledger and accounts for end users. Experts indicate that this innovative structure will promote creativity, competition, and enhanced service delivery.

Facilitating Wider Access

Additionally, by introducing a new category of service providers known as “Access Enablers” (AEs), legal analysis has confirmed the viability of Project Sela’s proposed model. These specialized firms manage consumer interactions without directly controlling or holding digital currency.

Since all transactions are settled on the central bank’s balance sheet, which maintains ultimate responsibility for the currency, credit risk is mitigated. This arrangement reduces requirements for AEs, potentially increasing the number of available payment processors and encouraging competition.

Project Sela’s focus on cybersecurity addresses concerns that broader access may create new vulnerabilities. The goal is to ensure that security remains intact while benefiting from accessibility by leveraging Israel’s expertise in cybersecurity and drawing insights from initiatives in Hong Kong.

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