Hong Kong’s Supervisory Incubator for Blockchain

Hong Kong has established a supervisory incubator aimed at assisting banks in adopting blockchain technology as part of its efforts to become a crypto hub.

On Wednesday, the Hong Kong Monetary Authority (HKMA), the region’s de facto central bank, announced that this incubator focuses on helping banks manage the risks involved in experimenting with blockchain or Distributed Ledger Technology (DLT) implementation.

The incubator will specifically address tokenized deposits, aiming to mitigate potential risks when banks transition to implementing services like deposits and loans that link DLT-based solutions with traditional banking systems, according to the HKMA.

The HKMA intends to create a supervisory platform for banks to evaluate their risk control measures prior to launching any blockchain-based products.

Arthur Yuen, deputy chief executive of the HKMA, stated, “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.”

In 2023, Hong Kong introduced a crypto licensing regime for trading platforms, welcoming crypto firms into the region. Additionally, the government’s proposed stablecoin bill is moving forward through the Legislative Council.