CBDCs Can Work With Stablecoins, Central Bank Trial Finds

The Hong Kong Monetary Authority claims its retail central bank digital currency prototype safeguards flexibility and privacy.

AccessTimeIconOct 21, 2022 at 8:59 a.m. UTC
Updated Oct 21, 2022 at 2:48 p.m. UTC

A new experiment shows central bank digital currency (CBDC) can work with private stablecoins, even if intermediary operators go bust, the Hong Kong Monetary Authority said Friday.

Private stablecoins are designed to maintain stable values relative to a reference currency like the U.S. dollar or an asset like gold, while CBDCs are digital versions of sovereign currencies.

Project Aurum – named after the Latin word for gold – shows CBDCs used by retail customers can be private and flexible, said its architects, who also include the Bank for International Settlements Innovation Hub and a research institute.

“Project Aurum has made a number of ground-breaking achievements,” said the study. “We have no doubt that the Aurum prototype will catalyze and inspire the global quest for the most suitable rCBDC [retail CBDC] architecture.”

Over 100 jurisdictions worldwide are looking into issuing a CBDC, according to the Atlantic Council, and experiments are taking place across the world.

Those projects often assume banks or other payment companies would intermediate the service. Crucially, Aurum also tested out a system where regular shoppers don't get their hands directly on a CBDC but instead use private stablecoins – in the same way modern-day card payments use commercial bank money backed up by central bank guarantees.

“Bringing CBDC-backed stablecoins to life has never been done before,” the study said. “The system developed for the CBDC-backed stablecoins is unique and can be useful” for central banks, it added.

Funds were made traceable on the prototype so customers could get their money back if the intermediary goes bust – but it would still safeguard privacy through the use of pseudonyms, the study said.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Jack Schickler

Jack Schickler was a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.