Yesterday (8th), the Hong Kong Monetary Authority launched a "Distributed Ledger Technology (DLT) Regulatory Incubator" to assist Banks in responsibly exploring the potential of DLT.

The aforementioned incubator will enhance the risk management capabilities of individual Banks and the entire Banking Industry, particularly regarding the risks that might arise when Banks launch services involving both DLT Banking Infrastructure and traditional Banking Infrastructure (such as deposits and loans) simultaneously. For individual Banks, the incubator will provide a one-stop regulatory platform, allowing Banks to confirm that relevant risk management measures have been fully implemented before the comprehensive launch of DLT projects. Through the platform, Banks can communicate with the HKMA's dedicated team and receive regulatory advice, as well as choose to conduct real-world testing as needed to pragmatically and continuously verify and improve the risk management measures.

In addition, the incubator will also introduce a series of measures to promote awareness and understanding of best practices for DLT risk management in the Banking Industry, including regulatory guidelines, industry sharing sessions, and forward-looking research projects.

The HKMA's Vice President, Yuen Kwok-Hang, stated that as the Banking Industry continues to develop, Hong Kong must provide an environment that supports innovation. The HKMA encourages Banks to develop safe and efficient DLT solutions that can benefit the entire Industry and society, and the DLT Regulatory Incubator is an important part of the authorities' strategy.

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