On January 11, 2025, Hong Kong's Monetary Authority (HKMA) announced the establishment of a "supervisory incubator" aimed at encouraging local banks to safely experiment with and adopt blockchain technology. This initiative is designed to enhance the banks' products and services through the advantages offered by distributed ledger technology (DLT).
The HKMA's announcement outlines a focus on tokenized deposits initially, with plans for banks to implement blockchain-based deposits and loans that could operate outside traditional banking infrastructures. Arthur Yuen, HKMA's Deputy Chief Executive, emphasized the need for a supportive environment for innovation within the banking sector.
This development follows a recent report from the People’s Bank of China (PBOC), which indicated that the Chinese government is monitoring Hong Kong's experience with cryptocurrencies and associated technologies. The PBOC aims to improve regulatory frameworks for digital assets, taking cues from Hong Kong's evolving regulatory landscape.
While the Chinese government has recognized the benefits of blockchain technology, it maintains a restrictive stance on cryptocurrencies, which are banned for commercial operations and mining. In contrast, Hong Kong has relaxed its crypto sector policies in 2023, progressively expanding its licensing regime for trading platforms and related services.