Hong Kong wants banks in its region to adopt more blockchain innovations through a newly established supervisory incubator
The Hong Kong Monetary Authority (HKMA) on January 8 unveiled an ambitious initiative called “The Supervisory Incubator.”
This works on distributed ledger technology, helping banks focus on tokenized deposits and properly adopting blockchain technology. According to Arthur Yuen, HKMA’s Deputy Chief Executive, the initiative would help banks unlock the revolutionary potential of DLT.
How Will the DLT Supervisory Incubator Work?
In exploring the adoption of Blockchain technology, Hong Kong hopes to become Asia’s crypto hub or digital finance leader.
Hence, adopting the DLT Supervisory Incubator would help banks update or share timely financial records across multiple systems. Aside from giving banks easier processes, formidable security, and lower costs, the incubator would check the risks involved in blockchain.
The Incubator would also target tokenized deposits to avert risks associated with loans and deposits. By implication, individual banks can assess their risk control systems before launching a blockchain-based product.
As announced, crypto projects like Ripple, Chainlink, and Cyber-Port will work with Hong Kong’s Fintech Association.
The incubator has two key goals. The first ensures banks get mutual consultation in testing systems before inventing DLT-based services. The second hinges on exposing banks to new knowledge and co-learn best practices. It would provide real-world testing, hands-on help, and a conducive atmosphere for testing DLT.
Other salient functions are giving direct access to experts who give practical advice and guidance to banks.
Banks can accept tokenized deposits, improving liquidity and reducing costs while easily managing risks. Financial institutions can refine databases before rolling out DLT-based services.
Beyond the cross-border payments, DLT makes identity verification better secured, streamlines all supply chains, and automates all processes.
One country that has explored related innovation is Russia, which integrated DLT into its Central Bank’s operations for cross-border transactions.
Meanwhile, private companies in other Asian nations like Singapore are also exploring the potential of DLT. As reported earlier by BGECrypto, DBS Bank floated a token-based service for its crypto clients to dominate the tokenization scene.
Hong Kong’s Vision and Action
Hong Kong intends to shape the future of finance, and part of its plans is to adopt the incubator, as mentioned earlier.
It also enacted the crypto licensing regime that oversees crypto trading firms and their activities. The island launched this licensing regime in 2023. Furthermore, the Hong Kong government is advancing the approval process for a stablecoin Bill, now at the Legislative Council.
Hong Kong will join regions like the European Union with a functional stablecoin regulation to guide issuers if passed.
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