The central banks of Hong Kong and the United Arab Emirates have recently revealed their intention to strengthen financial cooperation, including the regulation of virtual assets. This was discussed at a bilateral meeting held in Abu Dhabi, where topics such as cross-border trade settlements and the development of financial infrastructure were also addressed.
Notably, the UAE’s securities and commodities authority has started granting licenses to crypto companies, with Hong Kong’s Hex Trust swiftly becoming one of the first recipients. Hong Kong and the UAE’s efforts to collaborate on blockchain technology appear to be gaining momentum, as seen in fintech and Web3 platform Finoverse’s recent decision to expand operations from Hong Kong to Dubai.
The central banks’ focus on facilitating cross-border trade transactions presents the possibility of integrating central bank digital currencies (CBDCs) to expedite transfers and minimize costs. This could also reduce dependency on the US dollar. The UAE has been accelerating its CBDC efforts, expressing intent to complete the first phase of its digital dirham strategy by next year.
Moreover, the UAE and Hong Kong have been cooperating on mBridge, a new blockchain that can support multiple CBDCs. This project aims to address the limitations of current cross-border payment systems, with real corporate transactions tested during its trial phase.
However, Hong Kong’s situation remains somewhat complex. Despite the promise of a high degree of autonomy until 2047, critics argue that China has been gradually installing pro-Beijing candidates in positions of power. It is worth mentioning, though, that China is already at an advanced stage regarding CBDCs, as exemplified by the ongoing expansion of the digital yuan.
While the digital yuan doesn’t seem to be coming to Hong Kong in the near future, the region’s monetary authority has instead announced a pilot for an electronic form of the Hong Kong dollar. Sixteen firms will participate in exploring the full range of potential use cases, from full-fledged payments to tokenized deposits, and Web3 transactions to tokenized asset settlements.
In conclusion, the central banks of both Hong Kong and the UAE have displayed a keen interest in the potential of blockchain technology, CBDCs, and virtual assets. Despite some political complexities, their collaborative developments such as mBridge indicate promising progress. The widespread adoption of electronic currency solutions, coupled with the exploration of innovative use cases, could have significant global implications on cross-border trade settlements, further emphasizing the transformative power of blockchain technology.
Source: Decrypt
