The Hong Kong Monetary Authority (HKMA) has launched a program to assist banks in adopting distributed ledger technology. In an announcement on January 8th, the Hong Kong central bank rolled out its “Supervisory Incubator for Distributed Ledger Technology.”
This aim was to help banks safely incorporate distributed ledger technology into their daily operations and activities.
According to the Deputy Chief Executive of HKMA, Arthur Yuen, this would provide an essential support system for innovation to thrive, which is highly paramount.
“As the banking industry continues to evolve, it is essential that we provide a supportive environment for innovation to thrive,” he said “The Supervisory Incubator for Distributed Ledger Technology 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 consists of two major components, with individual bank support providing access to a dedicated team from the central bank for feedback on trials. These trials would test the bank’s risk management before fully implementing DLT services. The major focus would be on tokenized deposits.
Support for Innovation in the Banking Sector
Aside from that, the initiative will ensure industry-wide development by providing supervision. This would include sharing best practices and conducting adequate research to help the banking sector properly implement distributed ledger technology.
At the individual bank level, the Incubator initiative offers a supervisory platform to ensure the adequacy of their risk management processes. This would be before the full implementation of the DLT-based initiative.
The HKMA announcement came during the fourth edition of the FiNETech series (FiNETech4). There were over 300 professionals from the banking, securities, and insurance sectors. The purpose was to explore how Distributed Ledger Technology could drive innovation in the financial industry.
Established in April 2024, the FiNETech series was created as an initiative for the HKMA to promote fintech and blockchain adoption nationwide. The initiative is supported by financial regulators, industry associations, and technology communities and is powered by financial market experts.
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