The Hong Kong Monetary Authority (HKMA) has launched a new initiative to assist banks adopting distributed ledger technology.
On Jan. 8, the Hong Kong central bank announced the launch of its “Supervisory Incubator for Distributed Ledger Technology,” a new initiative that aims to help banks safely implement distributed ledger technology into their operations and maximize its benefit.
“As the banking industry continues to evolve, it is essential that we provide a supportive environment for innovation to thrive,” said Arthur Yuen, deputy chief executive of the HKMA.
He added that the Supervisory Incubator for DLT “is a key component of our strategy to foster the development of DLT-based banking solutions that are safe, efficient, and beneficial to the industry and the wider community.”
The program has two main components, with individual bank support giving banks access to a dedicated team from the central bank for feedback on live trials. These will test the bank’s risk management systems before fully launching DLT-based services, and the initial focus will be on tokenized deposits.
The initiative will also promote industry-wide development by sharing best practices, providing supervisory guidance, and conducting research to help the entire banking sector better understand and implement DLT solutions.
The launch was announced during HKMA’s FiNETech4 event on Jan. 8, which brought together over 300 financial sector professionals.
HKMA Executive Director Carmen Chu delivering opening remarks at FiNETech4: Source: HKMA
“As DLT continues to evolve, we could expect to witness more sophisticated ways of managing tokenized assets, such as real-time ledger updates, autonomous book-keeping, and streamlined reconciliation processes,” said Carmen Chu, HKMA Executive Director.
“This will ultimately enable new forms of transactions that are not feasible with traditional financial infrastructure,” she added.
Chu continued to explain that by tokenizing real-world data, banks can develop innovative financial products with smart contracts tailored to the unique needs of specific industries, unlocking new revenue streams.
In December, Wu Jiexhuang, a member of Hong Kong’s Legislative Council, proposed leveraging China’s “one country, two systems” framework to add Bitcoin to Hong Kong’s national reserve for financial stability.
Meanwhile, Hong Kong’s securities regulator approved licenses for four more virtual asset trading platforms in December, bringing the total to seven.
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