Hong Kong’s Retail Central Bank Digital Currency Project Includes a CBDC-backed Stablecoin

The Hong Kong Monetary Authority disclosed its final Aurum – a prototype for a retail CBDC. The system, which is established in collaboration with the Innovation Hub of BIS, has an exclusive structure denoting the intricacies of the prevalent system used for issuing money across Hong Kong.

Hong Kong Introduces Its Conclusive Retail CBDC Strategy Including a CBDC-Backed Stablecoin

Aurum comprises a retail e-wallet and a wholesale system that operates between the banks. The e-wallet is developed at a native bank with a smartphone interface.


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With a validator system, the things like consumer double redemption and bank over-issuance are prevented. The retail central bank digital currency (which is intermediated) is utilized in the e-wallets while CBDC-supported stablecoins are utilized in a system between the banks.

The rare stablecoins which are backed by the CBDC digitally mirror the present currency system of Hong Kong in which the issuance of bank notes (which are supported on the behalf of the central bank) is done by 3 financial organizations. The central bank is directly responsible for the CBDC, whereas the in the case of the stablecoins the issuing banking entities have the responsibility.

The Concept of CBDC-Backed Stablecoins to Advance the Research in the Field

As per the authors, introducing the CBDC-supported stablecoins is an exclusive idea thus they consider it to be assistive in enhancing the research on the stablecoins operating within the private sector.

In their words, the difference between the stablecoins operating privately and Aurum is that the stablecoin balances of Aurum are reconciled, against the issuing bank’s real-time gross settlement (RTGS) balances with that of the central bank.

The significant gap between the retail and wholesale ledger provides a great scale of cyber-resilience to the system, according to the designer. The retail transfers are carried out with aliases. Just the intermediary doing operations such as Know Your Customer (KYC) can witness the customers’ identity.

The records of the unspent transaction output (UTXO) are utilized for the anonymously tracking of the ownership of digital currency via several transfers. This plays the role of a safety measure taken to meet the bankruptcy of commercial banks. The CBDC research was initiated by Hong Kong in June previous year as included in its wide-ranging Fintech 2025 Strategy.


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