Fubon Bank, based in Hong Kong, has revealed plans to conduct a real estate tokenization pilot in collaboration with Ripple, the blockchain and cryptocurrency firm known for its association with the XRP Ledger. This trial is part of a series of projects endorsed by the Hong Kong Monetary Authority (HKMA) as part of the central bank digital currency (CBDC) trials in the region.
The experiment aims to combine a simulated electronic Hong Kong Dollar (eHKD), tokenized real estate, and financial agreements to enable users to tokenize real-world assets as collateral for loans. The specifics of how a CBDC would benefit this particular use case were not clarified in the announcement.
The concept of utilizing CBDCs for real estate transactions has been explored in various ways. The Bank of England’s Project Meridian demonstrated the use of a delivery versus payment (DvP) settlement for a house purchase, aiming to mitigate the risk of transaction failure. Programmable money and smart contracts could further streamline high-value transactions, such as real estate purchases, by automatically locking funds until specific conditions are met.
Fubon Bank’s pilot aims to showcase these potential benefits. The trial will involve an eHKD wallet that allows users to monitor real-time loan-to-value ratios. As Hong Kong already possesses a fast payment system (FPS), the pilot aims to demonstrate additional value use cases for the CBDC and attract users by offering innovative solutions beyond the existing FPS.
Ripple’s CBDC platform, which utilizes similar technology to the XRP Ledger within a private network, will serve as the foundation for the simulation. Ripple has experience in CBDC initiatives, having collaborated with the Central Bank of Montenegro and the Republic of Palau on similar projects. The simulation is expected to take place in the third quarter of 2023.
