HKMA digs deeper into blockchain technology, releases white paper
The Hong Kong Monetary Authority (HKMA), in collaboration with the Hong Kong Applied Science and Technology Research Institute (ASTRI), has released a new white paper on distributed ledger technology (DLT), commonly known as blockchain.
According to the white paper, a DLT system has the potential to bring new opportunities and efficiencies to the banking and payment industries, which includes the capability of establishing trust in a distributed system, efficiency in broadcasting information in a speedy and secure way, the ability to achieve complete traceability of records and transactions, the possibility of lowering operation costs, and the potential for high resiliency. However, the paper emphasizes on the need to determine whether the technology is mature enough to be adopted by the financial sector globally.
“[B]efore concluding that DLT represents the best solution for all banking and payments issues, more work needs to be done to determine whether the existing DLT is mature enough to fulfil the requirements of the financial community, and to ascertain what key attributes or requirements DLT needs to incorporate in order to be widely and comfortably adopted by the banking and payment industries”, it said.
The white paper is perhaps the first stage of a larger research project and aims to provide the fintech industry in Hong Kong with a reasonably comprehensive study of the key features, benefits, risks and potential of DLT. The HKMA set up a Fintech Facilitation Office (FFO) in March 2016, which commissioned the ASTRI to conduct a research project on distributed ledger technology.
The white paper is the first deliverable of the project and includes the initial findings of the proof-of-concept work carried out on DLT applications in three areas: mortgage loan application, trade finance, and digital identity management. It said that the proof-of-concept work has been developing at different rates, adding that the most advanced is work on the mortgage loan application, for which testing is now being carried out.
“The next stage of this project will deliver more detailed findings from the proof-of-concept work, along with discussion on whether some of this work can be put into action. It will also address the regulatory implications of DLT, and the general control principles for DLT for the banking and payment industry. We plan to deliver the next set of results in the form of another white paper in the second half of 2017”, the paper added.