The Securities and Futures Commission, an independent statutory authority that regulates the securities and futures markets in one of the world’s major financial hubs in Hong Kong is joining the R3-led financial blockchain consortium.
According to a report in the Wall Street Journal, the Hong Kong regulator is working with R3’s numerous members that includes banks and technology developers to test blockchain ledgers to record and settle securities and futures transactions.
The collaboration is yet another example wherein banks and regulators are coming together to push blockchain prototypes out of the lab environment to real-world financial systems.
“Both sides need to understand why this tech works and what needs to be changed to make it comply,” stated R3 managing director Charley Cooper as quoted by the publication.
Bringing Fintech into a Financial Hub
Widely known as a traditionally technology-forward country, Hong Kong’s regulators are being pressed into making moves toward a friendlier climate for Fintech innovation and development. A recent report by services giant KPMG encouraged local banks to pursue research and development of financial technologies like blockchain.
In late 2016, the Hong Kong Monetary Authority (HKMA) – the country’s defacto central bank – established a ‘Fintech Innovation Hub’ and a supervisory sandbox to boost the development of financial technology in the financial services sector. Blockchain technology, in particular, was heralded as a game-changer in the financial industry by prominent Hong Kong technology hub Cyberport in a Fintech conference in mid-2016.
Testing of blockchain platforms have already taken shape in Hong Kong, according to Oliver Bussmann, blockchain advocate and former technology lead at UBS Group AG. Similar regulatory moves in Singapore, the United Kingdom and Canada have left the United States trailing in testing the technology. Compared to these countries, “the U.S. is about a year behind” Bussmann added.
Costs incurred to run some blockchain programs and prototypes using the HKMA’s sandbox are also being covered by the authority, making for an encouraging environment for development and trialing of new financial technologies.
Notably, Hong Kong’s financial secretary John Tsang Chun-wah pledged HKD $17B (approx. USD $2.19 billion) early last year toward building the necessary infrastructure to support Fintech startups and development in the country. More recently, the HKMA and the UK’s Financial Conduct Authority signed an agreement toward reciprocal cooperation between the two financial markets, particularly toward Fintech innovation.
More recently, New York-based Nasdaq offered its proprietary blockchain technology to the Hong Kong Stock Exchange. A number of market operators around the world are turning toward blockchain technology. Examples include developments in Australia, South Korea, multiple efforts in Japan, Canada, the UK among several others.
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