Hex Trust supports Ripple and Fubon Bank in HKMA's e-HKD Pilot Programme

Hex Trust supports Ripple and Fubon Bank in HKMA's e-HKD Pilot Programme

November 2, 2023

Hex Trust joined a consortium of partners supporting Ripple, the leading provider of enterprise blockchain and crypto solutions, and Fubon Bank, who were selected to demonstrate a use case for the settlement of tokenized assets as part of the Hong Kong Monetary Authority’s (HKMA) e-HKD Pilot Programme. 

The HKMA has been preparing for possible rollouts of the e-HKD and in October 2021, the HKMA published a technical whitepaper titled “e-HKD: A technical perspective”, which explored the potential architectures and design options for issuing and distributing e-HKD. The HKMA subsequently launched an e-HKD Pilot Programme in May 2023 which aims to showcase the potential of CBDC in various use cases.

The consortium of partners supporting Ripple and Fubon Bank on this project as part of e-HKD Pilot Programme includes: 

  • KodeLab: A full-service Digital Assets consultancy, offering clients advice and resources under 4 pillars: Engineering Risk, Regulatory Structure, Process Micro and Macroeconomics
  • TOKO: an award-winning regulated end-to-end virtual asset services platform at the forefront of the growing tokenisation industry, solving the inefficiencies of today’s capital markets.
  • Hex Trust: Hex Trust is a fully-licensed digital asset custodian that provides solutions for protocols, foundations, financial institutions, and the Web3 ecosystem.
  • BCW: An enterprise solutions firm and venture studio dedicated to building Web3 infrastructure and large-scale applications that connect and interact with the on-demand digital universe.
  • Stratford Finance: (Operational, Fintech, Blockchain and Regulatory Advisor) Stratford Finance provides consulting and advisory services to financial institutions and service providers on emerging technologies, regulatory policy and market conditions. 

The Use Case: Home Equity Line of Credit (HELOC)

The use case Hex Trust participated in pioneered a groundbreaking Home Equity Line of Credit (HELOC) pilot carefully designed to streamline access to excess property equity for Hong Kong citizens. The pilot leverages the Ripple CBDC Platform for the creation of a hypothetical e-HKD and begins with Fubon Bank securely minting hypothetical e-HKD, supported by a ledger fortified with robust multisig functionality. 

The integration of a hypothetical e-HKD into the HELOC facility potentially offers numerous advantages. Users benefit from a streamlined online platform that provides quick loan approvals and 24/7 access to property equity. They also gain transparency and control through real-time data on Loan-to-Value Ratios (LVR), available funds, and interest accrual. 

From an operational perspective, the solution enhances efficiency with end-to-end cryptography, guaranteeing auditable records, reducing manual processes, and enabling real-time reporting. 

Hex Trust’s Role

To ensure safekeeping of both Bank and Customer assets, Hex Trust acts as a custodian of the hypothetical e-HKD tokens using warm wallets and this provides near instant speed of transaction without compromising security as no private keys are held online on a server and are protected within an air gapped environment. The Hex Safe platform allows for seamless cross-chain integrations with other counterparties to receive deposit and withdrawal instructions within a chain agnostic ecosystem.

The use case demonstrated the ability for a bank to perform this role in a CBDC ecosystem through Fubon Bank partnering with Hex Trust to provide digital asset custodian services on a white label basis. The resulting division of responsibilities allowed Fubon Bank to manage the customer facing KYC/AML requirements, while Hex Trust provided the scalable wallet solution.

Exploring the Future

The ongoing pilot focuses on creating a working Property Tokenization and HELOC use case, with plans to expand based on findings. Potential developments include full property title deed tokenization, extending the pilot to broader lending markets, and exploring international applications. 

For further details regarding the pilot, you can access the expanded document describing the innovative project. 

Stay tuned as we pave the way for universal access to liquidity through tokenized property, transcending borders and limitations.

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