The Aurum retail central bank digital currency (CBDC) (1) prototype was finished and presented by the Hong Kong Monetary Authority on October 21. The system's distinctive structure, created in collaboration with the Bank for International Settlements (BIS) Innovation Hub, reflects the complexity of Hong Kong's current monetary system.
What does this project contain?
A retail e-wallet and wholesale interbank system make up the Aurum. The e-wallet has a smartphone interface and is produced at a nearby bank. A validator system avoids user duplicate redemption and bank overissuance. In e-wallets and the interbank system, intermediated retail CBDC and stablecoins (2) backed by CBDC are both used. With the peculiar CBDC-backed stablecoins, Hong Kong's current monetary system, in which bank notes are produced by three financial institutions and supported by the central bank, is digitally mirrored. While the stablecoins are liabilities of the issuing bank with supporting assets held by the central bank, the CBDC is a direct liability of the central bank.
If Implemented, then what?
Aliases will be used in retail transactions. Users' identities are only visible to the intermediary performing Know Your Customer services. If a commercial bank fails, ownership of digital money is tracked anonymously over many transactions using unspent transaction output data. Hong Kong wants to legalize cryptocurrency trade, unlike China. In June 2021, Hong Kong began conducting CBDC research as a part of its overall Fintech 2025 (3) Strategy. The monetary authority is working independently to adopt CBDC for retail and wholesale. The retail CBDC was observed to have no "imminent function" in the payments sector, but use cases may appear fast. The BIS Innovation Hub's first project to be finished is called Aurum.