Updated on January 9, 2023 12:51 PM
Hong Kong has started a number of regulatory actions pertaining to the cryptocurrency sector in an effort to reclaim its position as a major global cryptocurrency hub.Hong Kong, a Chinese metropolis and special administrative territory, is eager to set itself apart from mainland China with regard to its attitude to cryptocurrency legislation.
According to Elizabeth Wong, head of the fintech division at the Securities and Futures Commission, the Hong Kong government is considering introducing its own bill to regulate cryptocurrency in a way that is independent of China (SFC).
The existence of cryptocurrency depends on public approval, but for it to become widely used, governments must establish a supporting infrastructure that meets both the needs of the technology and the general public.A nation's willingness to adopt cryptocurrencies is indicated by elements including the installation of cryptocurrency ATMs, pro-crypto policies, startup culture, and a just tax system.
With a crypto-readiness score of 8.6, Hong Kong was found to be the nation best prepared for widespread cryptocurrency adoption according to a Forex Suggest study.
The BIS Innovation Hub and the Hong Kong Monetary Authority worked together to create a distinctive CBDC design that captures the practicalities of issuing currency in the special administrative area.
The Aurum retail central bank digital currency (CBDC) prototype was finished and presented by the Hong Kong Monetary Authority on October 21. The system's distinctive structure, which was created in collaboration with the Bank for International Settlements (BIS) Innovation Hub, reflects the complexity of Hong Kong's current monetary system.
A retail e-wallet and wholesale interbank system make up Aurum. The e-wallet has a smartphone interface and is produced at a nearby bank. A validator system avoids user double redemption and bank overissuance.
The peculiar CBDC-backed stablecoins are a digital representation of Hong Kong's current monetary system, in which bank notes are created by three financial institutions and backed by the central bank.
While the stablecoins are the issuing bank's liabilities with supporting assets held by the central bank, the CBDC is a direct liability of the central bank. According to the authors:
"Because it has never been done before, we felt that bringing CBDC-backed stablecoins to reality may enrich the expanding body of knowledge on private sector stablecoins. The fact that Aurum's stablecoin balances are reconciled, as opposed to the real-time gross settlement (RTGS) balances of the issuing bank with the central bank, is what actually sets it apart from private sector stablecoins."
In June 2021, Hong Kong began conducting CBDC research as a part of its comprehensive Fintech 2025 Strategy. The monetary authority is working separately to adopt CBDC for retail and wholesale.
The retail CBDC was noted to have no "imminent function" in the payments sector, but use cases might appear fast. The BIS Innovation Hub's first project to be finished was Aurum.