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Hong Kong will issue new guidelines for commercial lenders seeking to adopt distributed ledger technology (DLT) in the coming weeks, a top official at the city-state’s central bank has confirmed. The Hong Kong Monetary Authority (HKMA) is responding to several inquests by local banks seeking to adopt the technology.
Raymond Chan, the executive director of banking supervision at the HKMA, spoke recently at a blockchain event and pledged the regulator’s support for DLT adoption by the city’s banks.
The event was organized by the HKMA alongside the Securities and Futures Commission
and the Insurance Authority, the three primary regulators of Hong Kong’s world-leading financial services industry.
DLT is a “paradigm-shifting innovation” that local banks must leverage to compete with their global rivals in financial hubs like London, Singapore, and New York, Chan told the attendees. The technology will enhance efficiency through its programmability while ensuring cutting-edge security. Blockchain also supports automation through smart contracts.
“As a growing number of banks are approaching us to ask how this principle applies in practice to DLT, we plan to issue a set of guidelines in the coming weeks to outline the key considerations that the HKMA will take into account when reviewing banks’ DLT applications,” stated Chan.
While it will support DLT, HKMA will remain vigilant on regulatory compliance, with Chan reiterating the watchdog’s “same activity, same risk, same regulation” approach.
The new guidelines will not be binding, and banks are allowed to formulate their bespoke approaches as long as they remain compliant. They will also not be exhaustive, with the HKMA expecting to update them periodically.
Hong Kong is aggressively promoting blockchain adoption. A month ago, it launched Project Ensemble to push for a wholesale blockchain-powered CBDC. The project is also geared toward supporting tokenization, yet another field the city-state has taken a global lead in.
“We’ve always been at the cutting edge of the whole blockchain evolution, including CBDCs,” HKMA CEO Eddie Yue stated in an interview at the time.
Watch: Blockchain for banking and finance
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