The Hong Kong Monetary Authority is looking at retail CBDC use cases, such as the equity release of tokenized real estate assets with Ripple’s new CBDC product.
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Ripple will participate in the Hong Kong Monetary Authority’s (HKMA’s) digital Hong Kong dollar (e-HKD) central bank digital currency (CBDC) pilot program by showcasing a real estate asset tokenization solution. The company will reveal its new CBDC platform at the same time.
Ripple will partner with Taiwan’s Fubon Bank and others to demonstrate equity release with tokenized assets using a retail version of the e-HKD CBDC. Equity release, also known as a reverse mortgage, is the practice of a lender letting a homeowner access the equity in their home, with payment coming due only when the house is sold or the borrower dies.
Tokenization can reduce friction in the equity release process and speed throughput for banks, Ripple said in a statement. The company is participating in the so-called second rail of the program, which “will take deep dives into use cases as well as application, implementation, and design issues relating to e-HKD,” according to the HKMA.
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“Experiences coming out of the Rail 2 pilots will factor into any decisions by HKMA to go live with an e-HKD at a later date (Rail 3),” Ripple vice president of central bank engagements and CBDCs James Wallis told Cointelegraph in a written Q&A.
The pilot project will run on Ripple’s new CBDC product — the Ripple CBDC Platform — using a new private ledger with XRP Ledger technology and enhanced functionality, including offline transactions and non-smartphone use. Wallis added:
“All the pilot program partnerships that Ripple previously announced, including Montenegro, Palau and Bhutan, will leverage the CBDC Platform.”
Hong Kong started its CBDC research in 2017. “While it appears that e-HKD might not have an imminent role to play in the current retail payment market, we believe prospective use cases for e-HKD can emerge quickly,” the HKMA concluded in a recent paper.
Ripple has recently announced its participation in the Hong Kong Monetary Authority’s ‘e-HKD’ Central Bank Digital Currency (CBDC) pilot program. They will demonstrate tokenization and payment solutions using their new decentralized technology platform.
The e-HKD project was established in August 2020 and aims to explore the potential applications of CBDC as a payment tool and to evaluate the Hong Kong dollar’s use in cross-border payments. Ripple’s new decentralized technology platform will be tested in the program to examine how it can facilitate cross-border payments.
The CBDC platform leverages the open-source Interledger Protocol to securely move digital assets across payment networks, while allowing for analytics for monitoring payments. This service will provide the capacity for financial institutions to receive and process payments in a more secure, efficient, and cost-effective way.
Ripple’s technology will not only be used to study cross-border payment but also tokenization. The firm’s platform may integrate blockchain-based tokens which are convertible to other forms of digital currency. This could be used to tokenize digital assets such as stocks, bonds, and other financial products.
This new development could lead to efficient and cost-effective tokenization of assets, allowing for direct peer-to-peer clearing and settlement of financial assets. This could Accelerate the transition to a digital economy and drive innovation in the financial sector.
“We believe the CBDC platform developed by Ripple will both support tokenization of digital assets and facilitate cross-border payments. It’s an exciting development that could revolutionize the way that payments are processed,” said Thomas Ko, Head of Payments at Ripple.
Ripple is committed to supporting the e-HKD program and is confident its new CBDC platform will contribute to the project’s success. This is a key step towards driving innovation in the financial sector and may ultimately show how distributed ledger technology (DLT) can be used to improve the safety, speed, and liquidity of payments on a global scale.