Raymond Chan, Executive Director (Banking Supervision), Hong Kong Monetary Authority
Good afternoon, ladies and gentlemen, a very warm welcome to you all to today’s seminar “Unlocking the Potential of DLT in Financial Services”. This is the second seminar under the new Fintech Promotion Roadmap, jointly developed by the HKMA, the SFC and the Insurance Authority. DLT stands out as a paradigm-shifting innovation, fundamentally enhancing how transactions are conducted. The inherent immutability of data stored using blockchain technology holds great potential to increase the security and reliability of these transactions. Linked to smart contracts, DLT enables the programmability of complex, automated transactions, marking a leap forward in transactional efficiency and reliability.
The application of this cutting-edge technology across various sectors is creating new opportunities. Within the financial industry, DLT is introducing significant improvements in collateral management and expands asset liquidity. The real estate market benefits from the introduction of fractional ownership, thus increasing accessibility to property investment. The art sector is revolutionising ownership through the use of blockchain and non-fungible tokens (NFTs), opening up new avenues for ownership for valuable art pieces. These examples highlight the tangible benefits of DLT in real-world applications.
Yet, innovations such as DLT come with their own set of challenges, including upskilling, data privacy assurance, volatility management, and the establishment of robust cybersecurity controls. It is of utmost importance that our supervisory approach remains balanced, focusing on risks and maintaining a neutral stance towards the underlying technologies.
Our guiding principle is equivalence, that is, “same activity, same risk, same regulation". Our supervisory approach is risk-based and technology-neutral, seeking to maintain a level playing field.
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. While the considerations to be included in the guidelines will not be exhaustive nor binding on banks, we hope they can provide a helpful benchmark for banks looking to plan and develop DLT solutions.
Financial regulators in HK have provided a “safe space”, in the form of Sandboxes, in which firms can enter the financial services market and experiment with new ideas with a degree of supervisory oversight and support. This demonstrates our commitment to and support for the adoption of technology by the local financial industry. Our new Fintech Promotion Roadmap paves the way for further encouraging the adoption of DLT. In addition to this seminar, the HKMA, the SFC, the IA and the MPFA are rolling out other initiatives including research projects, training sessions, and spotlight videos to support the adoption of DLT among other financial technologies by financial institutions.
Ladies and Gentlemen, the best time to plant a tree was 20 years ago. The second best time is now. In the spirit of this insightful proverb, we acknowledge that the steps we take today in advancing Distributed Ledger Technology are seeds that will grow into the financial innovations of tomorrow.
For today’s seminar, we have gathered a line-up of distinguished speakers whose expertise and insights will guide us through the intricacies of this transformative technology. We will delve into the depths of DLT, unravelling its impact on the foundations of financial services and envisioning its potential to reshape our industry in ways we are only beginning to comprehend.
In closing, I would like to express my thanks and gratitude to the SFC for co-hosting today’s event, to our esteemed speakers and to all participants for joining us today. I wish you all a fruitful and enlightening seminar. Thank you.
