The Hong Kong government does not intend to issue a Central Bank Digital Currency (CBDC) in the near future. However, it remains interested in the field and will continue to monitor developments at the international level, a top government official has revealed. While CBDC enhances efficiency and has immense benefits, the circumstances of the jurisdiction in which they are issued determine their success. Hong Kong already has an efficient payment infrastructure which makes CBDCs ‘a less attractive proposition.’
CBDC Not Superior To Existing Infrastructure
The government was replying to a question posed regarding the rise of digital currencies and the way forward for Hong Kong. Through Joseph Chan, the Acting Secretary for Financial Services and the Treasury, the Hong Kong Monetary Authority (HKMA) addressed issues ranging from whether new regulations would be implemented for the industry to the measures the authority would take to deter criminal activities through digital currencies.
HKMA, the central bank for Hong Kong, recognized that in its current proposed form, CBDC is similar to and in no way superior to existing infrastructure. While CBDC could serve as an alternative convenient, robust and safe payment instrument, it raises critical challenges that must be addressed before they are rolled out. Further, in jurisdictions like Hong Kong where efficient private retail payment products already exist, the benefits of a CBDC would be limited.
So, will Hong Kong impose a ban on ICOs and related activities like China? HKMA will continue to work together with all the relevant regulatory authorities, token issuers and other stakeholders to adopt a progressive stance that protects the interests of the investors. The Securities and Futures Commission (SFC) however warned those whose digital tokens are offered as shares that they would be regulated as securities. Any stakeholder involved in such activities including in the managing or marketing processes would be regulated by the relevant security laws. With Bitcoin futures becoming popular especially in the US, the HKMA cautioned Hong Kong investors against thinking they are exempted from the Hong Kong securities laws even if the business was located outside Hong Kong. Earlier this year, the SFC cautioned crypto exchanges against issuing cryptos which were considered securities without the necessary licenses. The exchanges had either assured the SFC that they were not engaging in such practices or had ceased such practices.
The anonymous nature of cryptos made them susceptible to be used for illegal activities such as money laundering, the HKMA further pointed out. In this regard, it reminded financial institutions or any other related persons dealing in cryptos that they must comply with the regulations outlined under the Anti-Money Laundering and Counter-Terrorist Financing act. It concluded by reiterating that it would continue to protect the interests of the investing public.
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Author: Steve Kaaru”