A full stack CBDC system soon to become reality: insights from Project Aurum

Project Aurum is a full stack CBDC system by BIS Innovation Hub Hong Kong Centre, the Hong Kong Monetary Authority, and the Hong Kong?Applied Science and Technology Research Institute. Finally, the project is come up with a unique prototype for two-tier CBDC that comprised the wholesale interbank system in which "the wholesale CBDC (wCBDC) is issued to banks for onward distribution to retail users" and a retail e-wallet system in which the retail CBDC (rCBDC) circulates among retail users, HKMA set a goal to bring to life two very different types of retail tokens: (a) intermediated CBDC, also referred to herein as CBDC-tokens, and (b) CBDC-backed stablecoins, or in short, stablecoins. Why the project is unique?

The project delivers a prototype for public-private partnership in the field of digital currencies through a CBDC-backed stablecoins. For stablecoins, it may be a boon. From last few months, these second-generation digital currencies faced a lot of criticism after the collapse of Teera, the largest algorithm stablecoin. The biggest issue with these digital currencies is transparency; CBDC-backed stablecoins can solve this issue and can bring issuers confidence in stablecoins.

Second, most the CBDC projects in emerging economies are focusing on rCBDC. However, some central banks in collaboration with others are exploring the possibilities of wCBDC. Project Aurum proposed a prototype in which both rCBDC and wCBDC can work together. Specially, for a country like India which is exploring both rCBDC and wCBDC, Project Aurum can offer valuable insights.