Hong Kong: Studying Regulatory Framework for Digital HKD and Exploring Tokenization of Bank Deposits

The Hong Kong Monetary Authority (HKMA) has stated that it is actively studying the establishment of a regulatory framework for the digital Hong Kong dollar or stablecoins. It aims to promote the industry's application of Distributed Ledger Technology (DLT) to tokenize bank deposits. In the upcoming quarter, the HKMA plans to hold a seminar with the industry to introduce DLT technology.

HKMA Deputy Chief noted that the tokenization of bank deposits is not on a fixed timeline and will not be mandatory for all banks to adopt. The progress of this initiative will run independently from the research on the digital Hong Kong dollar; both efforts will proceed in parallel.

Assistant Chief Executive Arthur Chan expressed the hope that DLT technology could be more widely applied in the future. For example, transaction settlement times for bond issuances could be reduced to T+1. Tokenizing cash with smart contracts could enable instant settlement, reducing counterparty risk.

Chan acknowledged that DLT platforms still face limitations regarding technology maturity and stability. Further research is required as the technology develops. However, once the technology matures, there may be opportunities to expand tokenization to securities, real estate, and mortgage products.

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