HONG KONG – Despite the political tensions between China and Hong Kong, the city’s banking regulator, Hong Kong Monetary Authority (HKMA), on Wednesday announced a new agreement with the People’s Bank of China (PBoC), China’s central bank, on blockchain collaboration. The central banks signed a memorandum of understanding to link Hong Kong with the PBOC’s trade finance blockchain.
The partnership was solidified today between the PBOC’s Digital Currency Institute and Hong Kong Interbank Clearing. According to Chinese media, the two will begin working on a proof of concept early next year. It hopes to streamline trade financing and bring the benefits of blockchain to Hong Kong banks. A trial is expected to begin in the first quarter of 2020.
The HKMA believes the connection will provide firms in Hong Kong and mainland with more convenient trade finance services and enable banks in the city to expedite the expansion of their trade finance business.
“Technology offers ways to overcome some of the long-standing inefficiencies in financial services, like cross-border payments or trade finance. The use of blockchain technologies comes to mind,” Eddie Yue Wai-man, chief executive of the HKMA, said while speaking on the first day of Hong Kong FinTech Week 2019.
The HKMA had also conducted pilot schemes with its peers in the region to explore blockchain solutions.
$6 billion China Blockchain Fund
The news follows the endorsement of blockchain technology from Beijing, with president Xi Jinping personally called for its use to expand across the domestic economy. This endorsement is on full throttle as the regional governments and other organizations guaranteed blockchain funds of $5.7 billion for additional support.
“To lift Hong Kong’s fintech development to a new height, we must take a holistic ‘HK Inc.’ approach,” HKMA chief executive Eddie Yue commented as part of the MoU signing.