BDF and HKMA begin collaboration on MNBCs

The Banque de France and the Hong Kong Monetary Authority join forces to work on central bank digital currencies and their use in cross-border payments. The HKMA is the first central banking institution from outside the European Union to take part in an ECB exploratory project on the digital euro, testifying to the capabilities of the new entrant.

FACTS

• The Banque de France and the Hong Kong Monetary Authority (HKMA) have announced the launch of a partnership on the subject of interbank digital central bank money (MNBC).
• The two institutions will work on the interoperability of interbank MNBC infrastructures, namely the Banque de France's DL3S platform and the HKMA's Ensemble Sandbox.
• In terms of exchanges, the two institutions wish to focus in particular on cross-border and cross-currency payments, all in real time.
• The agreement should strengthen communication and collaboration between the BDF and the HKMA, and enable them to pursue their efforts in tokenization and the development of new technologies.
• This partnership is part of the second part of the Eurosystem's exploratory work launched by the European Central Bank.

CHALLENGES

• Promoting interoperability: This partnership aims to strengthen the exploration of the use of technology in payments. The two institutions will leverage their knowledge of MNBCs and payments to facilitate exchanges between different financial market infrastructures. Through their work, the BDF and HKMA also aim to promote financial inclusion between systems.
• MNBC pioneers: the Banque de France and the Hong Kong Monetary Authority have already demonstrated their involvement in innovative topics related to central bank digital currencies. The involvement of an institution responsible for central banking activities outside the Eurosystem underlines the HKMA's ability to contribute solutions to the work.

MARKET PERSPECTIVE

• Digital currencies are at the heart of the current challenges facing major financial institutions, and the advantages of using them are encouraging these institutions to move forward on these issues. For example, in April, Swift, the global provider of financial messaging services, issued positive conclusions on its work on tokenization and digital currencies.

• For its part, the Banque de France has been working on the subject since 2021, notably alongside the Swiss National Bank and the Bank for International Settlements. The aim of this project was to explore the use of digital currencies to facilitate intra-European payments.