The Hong Kong Monetary Authority (HKMA) collaborates with Bank of Israel and BIS Innovation Hub for Project Sela
The Hong Kong Monetary Authority (HKMA) has partnered with the Bank of Israel (BOI) and the Bank for International Settlements Innovation Hub (BISIH) Hong Kong Centre to release a joint report called “Project Sela – An accessible and secure retail CBDC ecosystem.” This collaboration between central banks aims to demonstrate the technical feasibility of a retail central bank digital currency (CBDC) framework that promotes competition and innovation in digital payments. The prototype, built on distributed ledger technology (DLT), showcases how the proposed structure can meet cybersecurity, legal, and policy requirements. The HKMA and BOI are both emphasizing the significance of cybersecurity in CBDC deployment. The findings from Project Sela will guide the continued research of the HKMA regarding the launch of an e-HKD in Hong Kong.
Exploring CBDC: HKMA’s previous initiatives
The HKMA has been exploring Central Bank Digital Currency (CBDC) since 2017. They initiated Project LionRock, focusing on large-value payments, and later collaborated with the Bank of Thailand for Project Inthanon-LionRock, which evolved into the Multiple CBDC Bridge (mBridge) in 2021. The mBridge recently completed a pilot phase, settling over HK$171 million in transactions. On the retail front, the HKMA is considering an e-HKD and has released a technical whitepaper in 2021 and a position paper in 2022 outlining their three-rail approach to implementation. The Rail 2 – e-HKD pilot program was launched in November 2022 to encourage stakeholders to explore e-HKD applications.
Hot Take: Advancing the Development of CBDC
The collaboration between the HKMA, Bank of Israel, and the BIS Innovation Hub for Project Sela marks an important milestone in the advancement of Central Bank Digital Currency (CBDC) development. By demonstrating the technical viability and cybersecurity measures of a retail CBDC framework, the project paves the way for increased competition and innovation in digital payments. The findings from Project Sela will inform the HKMA’s future research and decision-making regarding the launch of an e-HKD in Hong Kong. With the ongoing exploration and pilot programs, it is clear that the HKMA is committed to leveraging Distributed Ledger Technologies (DLT) and collaborating with other central banks to shape the future of digital currencies.
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