Report: Hong Kong Banks Should Explore Blockchain Tech Despite Regulatory Hurdles
The FinTech market, particularly with blockchain technologies, is expected to flourish in Hong Kong in 2017 due to increased cooperation between Fintech and financial services firms, a KPMG report has claimed.
In its “Hong Kong Banking Outlook 2017” [PDF] report, the services giant cites soaring investment in the Fintech sector leading to the “rapid” development of the Fintech industry in Hong Kong.
Blockchain technology is proving to be of particular interest among Hong Kong banks, the report added, with its popularity in the payments and lending space. The innovation, which is bitcoin’s underlying technology, has proven to significantly increase operational efficiency in the payments industry, with faster and near-instant settlements amid lower costs, due to the lack of a settlement agency.
Still, the KPMG preview points to a recent report by the Hong Kong Monetary Authority (HKMA) that pointed to “significant legal and regulatory issues” that could arise from using blockchain technology, despite its many benefits.
“[Blockchain offers] good potential, but a lot of things need to be addressed,” said Shu Pui Li, executive director at the HKMA, last month. The country’s central bank specifically points to the potential risk of money laundering.
Taking note of the HMKA’s scrutiny of the technology, the KMPG report added:
While this should not detract Hong Kong banks from exploring blockchain opportunities, they should also carefully monitor regulatory developments and take steps to enhance their risk management procedures around this technology.
FinTech Firmly on the Agenda
Despite throwing caution toward the abuse of blockchain technology, the Hong Kong central bank is firmly pushing ahead with its Fintech initiative in its attempt to pin Hong Kong as a fintech hub in Asia to compete against the likes of Singapore, Japan and more recently, mainland China.
Earlier this year, the financial secretary of Hong Kong pledged HKD $17 billion (approx. USD $2.19 billion) toward the development of a Fintech ecosystem in the country. More recently, the HKMA established a Fintech innovation hub and supervisory sandbox where banks will be allowed to conduct proof-of-concept trials and services before pushing Fintech solutions into the Hong Kong economy.
A notable example of Hong Kong’s Fintech initiative was revealed earlier this month, when the HKMA and the UK’s Financial Conduct Authority (FCA), co-signed an agreement for cooperation between the two markets in Fintech innovation. The partnership is significant to be sure, as London remains the global hub for Fintech despite increasing competition from Singapore and New York.
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