The central banks of Hong Kong and the United Arab Emirates have announced plans to strengthen their financial cooperation—and work together on regulating virtual assets.
A bilateral meeting was held in Abu Dhabi, with financial infrastructure and cross-border trade settlements also on the agenda.
Last month, the UAE's Securities and Commodities Authority began allowing crypto firms to apply for operating licenses—and Hex Trust, a crypto custodian based in Hong Kong, was one of the first to receive one.
The fintech and Web3 platform Finoverse, which is headquartered in Hong Kong but recently opened an office in Dubai, recently told The National that it expects both regions to cooperate more closely on blockchain technology.
Their focus on cross-border trade settlements could open up the possibility of central bank digital currencies being used—speeding up transfers and reducing costs, as well as a reliance on the U.S. dollar.
Back in March, the Central Bank of the UAE announced that it was planning to ramp up its ambitions for a CBDC—with the first phase of a strategy to launch a digital dirham set to be completed by this time next year.
Both the UAE and Hong Kong have already been working together to build mBridge, a new blockchain that supports multiple CBDCs and aims "to tackle the limitations of today's cross-border payment systems." Real corporate transactions were conducted as part of a trial.
Things are a little bit more complicated in Hong Kong. While the region is meant to have a high degree of autonomy until 2047, critics have accused China of increasingly installing pro-Beijing candidates to positions of power.
China's quest to launch a CBDC is at an advanced stage, with the digital yuan continuing to be rolled out to the masses at pace. Last month, it was announced that civil servants in the city of Changshu would be fully paid using e-CNY—a significant milestone considering it's home to 1.7 million people.
However, it doesn't seem like the digital yuan will be coming to Hong Kong anytime soon. Earlier this month, its monetary authority announced that it was launching a pilot for an electronic form of the Hong Kong dollar. Sixteen firms will be involved in exploring use cases such as fully fledged payments, tokenized deposits and the settlements of Web3 transactions and tokenized assets.