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Chainlink will securely exchange Hong Kong CBDCs and Australian dollar-linked Stablecoins.

Chainlink’s CCIP enables transactions between different blockchains and the efficient transfer of data between networks.

In May, the Hong Kong Legislative Council passed the Stable Coin Bill.

Blockchain oracle provider Chainlink announced that it is securely exchanging Hong Kong CBDC and Australian Stablecoin in the second phase of the e-HKD pilot program.

For some time, the pilot project has been aimed at exploring how tokenization can facilitate the development of next-generation payment infrastructure. This means understanding the role of tokenization in transactions, with the top priority of maintaining financial stability and compliance standards.

At the moment, the Hong Kong Monetary Authority is in charge of issuing and managing the reserves of the Hong Kong CBDC. At the same time, ANZ plays a similar role for tokenized deposits.

Compared to fiat currency exchanges, the e-HKD pilot program allows public CBDCs to interact securely and efficiently, with less delay, transaction costs and reliance on multiple intermediaries. Therefore, the pilot participants were eagerly awaiting the success of the project.

They took a long look at different communication strategies that could simplify cross-network transactions, and they had to choose among three. The first approach was to use time-locked hash contracts to allow conditional transactions between multiple blockchains. In this case, the sender can set the hash lock and initiate the transaction, securing the assets according to the hash and time constraints.

The second approach implies that the issuer of digital assets manages the issuance and burning of tokens across different networks to enable inter-network transfers. Despite the simplicity of the trusted issuer model, it had significant drawbacks: it required constant manual involvement, did not take advantage of the blockchain’s programmable potential, and lacked transparency and verifiability compared to decentralized blockchain solutions.

The third option is Chainlink CCIP, which enables cross-network transactions and data transfer between different networks.

As reported in Chainlink X’s publication, they will now focus on facilitating transactions. Using Chainlink’s CCIP, the pilot initiative hopes to provide seamless cross-border payments, reducing costs and increasing efficiency through smart contract automation, real-time data validation, and network-to-network interoperability.

In addition, Visa and Fidelity are backing the pilot program. However, some analysts are wary of the implications of the e-HKD pilot. In addition, regulators and financial institutions continue to monitor programmable digital assets and their possible use in monetary systems. Nevertheless, the participation of Visa and Fidelity indicates that institutions are interested in exploring new financial infrastructure – as long as security, regulatory and scalability standards are met.

Analysts also believe that such pilot projects will form the basis for the creation of new CBDCs and stablecoins.

In May, Hong Kong’s Legislative Council approved the Stable Coin Bill, which regulates fiat-backed stablecoin issuers. The law has been published but has yet to come into effect, and no effective date has been set. However, the HKMA says the law will come into force this year. In the meantime, the authority is still gathering feedback on the proposed anti-money laundering (AML) and countering the financing of terrorism (CFT) requirements for issuers of stablecoins. CITIC Securities, China’s largest securities firm, recently issued a research note on the stackcoin laws in May, arguing that stackcoins enable tokenization of real assets and expand tokenization activities beyond mainland China.