HKMA Launches Supervisory Incubator to Enhance Banks' Use of Distributed Ledger Technology

HKMA launches Supervisory Incubator to foster responsible adoption of distributed ledger technology

The following is issued on behalf of the Hong Kong Monetary Authority:

The Hong Kong Monetary Authority (HKMA) launched the Supervisory Incubator for Distributed Ledger Technology (the Incubator) today (January 8) to help banks responsibly unlock the transformative potential of distributed ledger technology (DLT).

The Incubator is a new supervisory arrangement designed to help banks maximise the potential benefits of DLT adoption by effectively managing the associated risks. It will augment risk management capabilities at both the individual bank and industry levels, with a particular focus on addressing those risks that may arise as banks move to productionise relevant services (e.g. deposits and loans) that cut across DLT-based and legacy banking infrastructures. As part of this effort, tokenised deposits - which have attracted significant production interest from industry - will be a core focus upon the Incubator's inception.

At the individual bank level, the Incubator will offer a one-stop supervisory platform that enables banks to reaffirm the adequacy of their risk management controls prior to the full launch of a DLT-based initiative. By leveraging this platform, banks will have access to a dedicated team from the HKMA for obtaining supervisory feedback and may opt to conduct live trials to validate and refine specific aspects of their risk management implementation under a hands-on and iterative approach, as needed.

The Incubator will also promote industry awareness and understanding of best practices in DLT risk management through a range of targeted initiatives, such as supervisory guidance, industry sharing sessions, and forward-looking research projects. Collectively, these initiatives will enhance the overall industry's ability and readiness to deploy DLT-based solutions in the long run.

Deputy Chief Executive of the HKMAMr Arthur Yuensaid, "As the banking industry continues to evolve, it is essential that we provide a supportive environment for innovation to thrive. 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 HKMA announced the launch of the Incubator during the fourth edition of the FiNETech series (FiNETech4), which brought together over 300 professionals from the banking, securities, insurance, mandatory provident fund and technology sectors to explore how DLT could help the financial industry break new frontiers, including with respect to transaction efficiency and information utilisation. The FiNETech series was established in April 2024 as a signature initiative of the HKMA's ongoing work to promote fintech adoption across the industry, and is supported by financial regulators (Note 1), industry associations (Note 2), as well as technology communities(Note 3), and powered by market experts (Note 4).

Note 1:The HKMA, the Securities and Futures Commission, the Insurance Authority and the Mandatory Provident Fund Schemes Authority.

Note 2: The Hong Kong Association of Banks and the FinTech Association of Hong Kong.

Note 3: Cyberport and the Hong Kong Science and Technology Parks Corporation.

Note 4: KPMG and Quinlan & Associates.

HKMA launches Supervisory Incubator to foster responsible adoption of distributed ledger technology Source: HKSAR Government Press Releases

HKMA launches Supervisory Incubator to foster responsible adoption of distributed ledger technology Source: HKSAR Government Press Releases

HKMA launches Supervisory Incubator to foster responsible adoption of distributed ledger technology Source: HKSAR Government Press Releases

HKMA launches Supervisory Incubator to foster responsible adoption of distributed ledger technology Source: HKSAR Government Press Releases

Remarks by FS at media session (with photo/video)

The Financial Secretary, Mr Paul Chan; the Secretary for Financial Services and the Treasury, Mr Christopher Hui, and the Secretary for Commerce and Economic Development, Mr Algernon Yau, together with the Chief Executive Officer of the Securities and Futures Commission, Ms Julia Leung, and the Chief Executive of the Hong Kong Monetary Authority, Mr Eddie Yue, met the media this evening (April 7). Following are Mr Chan's remarks at the media session:

Reporter: What tools does the Government have to handle the situation of the market and will Hong Kong consider a national team investor equivalent to intervene? Should the markets keep dropping, what is the bottom line for the state of the market before countermeasures will be considered?

Financial Secretary: I think Julia has explained very clearly the situation in the Hong Kong stock market. Basically, the market has been functioning orderly. There are substantial selling but also buying interests. The spread between the two has been very tight, indicating that the buying power remains very strong.

Hong Kong is a free port, and we encourage capital and investors from different parts of the world to take part in our capital market. Over the years, we have been taking a number of measures to enhance the competitiveness and attractiveness of our capital market, no matter whether it is improving the listing regime, lowering the transaction costs, expanding the markets, attracting investors and capital from around the world, or offering new products such as the ETF (exchange-traded fund) listed on the Saudi stock exchange (and investing in the Hong Kong stock market). All in all, we will persistently and consistently push forward initiatives on various fronts. With an expanding market and more participants from different parts of the world, the liquidity and resilience of our market will be enhanced. The resilience of our market has been very strong. We do not think the current volatility in the market warrants the taking of any drastic measures.

(Please also refer to the Chinese portion of the remarks.)

Remarks by FS at media session (with photo/video) Source: HKSAR Government Press Releases