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HKMA taps ConsenSys for cross-border CBDC study

The firm will develop models for using central-bank digital currencies for payments with Thailand.



The Hong Kong Monetary Authority has awarded a ConsenSys-led consortium a mandate to research cross-border digital payments. PwC and Shenzhen-based fintech Forms Syntron comprise the other members of the team.

This follows last year’s agreement between HKMA and Bank of Thailand to consider the applications for a central-bank digital currency (CBDC) for payments between the two jurisdictions.

This is called Project Inthanon-LionRock, representing the digital currency efforts of the two respective monetary authorities.

For the HKMA, this represents “phase 2” of LionRock, which kicked off quietly in 2017. A first study into how HKMA could issue a digital Hong Kong dollar was led by a group including R3, consultant Chappuis Halder, and local blockchain developer CryptoBLK.

For ConsenSys to win the next mandate suggests possible limitations to cross-border digital money based on enterprise, permissioned blockchains. ConsenSys is a commercial developer focused on Ethereum, a public, permissionless blockchain.

Blockchain versus DLT

The new study will examine whether an enterprise approach is better suited for wholesale projects while a public blockchain would support a general retail CBDC.

It will also look at structure: should a CBDC technology be focused on accounts – that is, focused on accounting identities of users, only visible as movements on a ledger – or on tokens, meant to replicate physical cash in digital form? Can a blockchain technology provide both?

Bank of Thailand began its own CBDC explorations in 2018 with Project Inthanon, initially envisaged as based on distributed ledger technology for real-time gross settlements and tokenizing cash or debt instruments. In 2019, BoT added a new phase of study focused on secure means of delivery versus payments of a domestic digital baht.

In May 2019, the two authorities extended their respective projects to account for cross-border linkages.

Hong Kong hotspot

For ConsenSys, the mandate follows the recent acquisition of Quorum, J.P. Morgan’s enterprise blockchain protocol, which supports applications such as the Interbank Information Network, a payments network among banks that serves as an alternative to the SWIF-based correspondent banking system.

It also comes at a time when other developments are shaking up the digital-currency world in Hong Kong.

China-backed Blockchain Services Network has decided to use DAML, a blockchain-agnostic language for writing smart contracts, to provide compatibility among various networks. 

The People’s Bank of China has added Hong Kong, as part of the Greater Bay Area, as a stage for piloting its own digital currency.

Mainland China and Hong Kong are also expanding corridors for investment: StockConnect, BondConnect (including now access to the mainland’s interbank bond market), and funds channels.

Capital controls and concerns over the movement of data have kept the Greater Bay Area in the realm of rhetoric. These developments may be accreting into something tangible.

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