A recent experiment by the Hong Kong Monetary Authority, called Aurum, demonstrates that private stablecoins can coexist with central bank digital currencies (CBDC), even if the intermediate operators fail.
CBDCs are digital representations of national currencies, whereas private stablecoins are intended to maintain stable values concerning a fiat currency like the U.S. dollar or an asset like gold.
The CBDC used by retail customers can be private and flexible, according to Project Aurum’s architects, who include the Bank for International Settlements Innovation Hub and a research institute. Project Aurum is named after the Latin word for gold.
According to the report, Project Aurum has accomplished a number of “ground-breaking” feats. The search for the ideal retail CBDC architecture will be sped up and inspired by the Aurum prototype.
According to the Atlantic Council, there are over 100 countries globally considering issuing a CBDC, and trials are being conducted everywhere. These initiatives frequently involve service intermediaries like banks or other payment providers.
Aurum also tested a system that uses private stablecoins rather than CBDC, which is similar to how modern card payments use commercial bank money backed by central bank guarantees. This is significant because it mimics how everyday people currently use private stablecoins.
In order to create policies to support the local fintech economy, the Hong Kong Monetary Authority (HKMA) set out to form a new Fintech Cross-Agency Cooperation Group last year. In early 2020, Hong Kong started a seven-month collaboration with the Bank of Thailand to look into the “potential of wholesale CBDC for cross-border payments” after launching its CBDC research in 2017 with Project LionRock.
