HKMA Sets Out Two-Year Roadmap to Promote Adoption of Regtech

HKMA had commissioned KPMG to develop a whitepaper to explore the current state of regtech in Hong Kong, examine common practices and barriers to adoption, and outline a roadmap to accelerate adoption in the banking sector. The research for this white paper is based on surveys conducted with local banks and regtech providers as well as in-depth interviews with banks, regtech firms, local and overseas regulators, and other industry stakeholders. The whitepaper sets out a high-level roadmap of planned initiatives from the list of 16 recommendations that have been developed to aid implementation over the next two years. A couple of key recommendations areas involve boosting awareness by issuing practical guidance and enhancing regulatory engagement with the regtech ecosystem through ongoing dialog and collaboration. To implement the recommendations, HKMA will roll out a series of events and initiatives in the coming two years, including:

• Developing a Regtech knowledge hub, in the second to third quarter of 2021, that acts as a central repository of all regtech-related content and knowledge-sharing for the Hong Kong banking industry
• Developing a "Regtech Adoption Practice Guides" series, in the first to second quarter of 2021, that could potentially build on or supersede the "Regtech Watch" newsletter series
• Devoting some of the “Regtech Adoption Practice Guides” series, to focus on how to utilize the key technologies enabling regtech adoption, in the first to second quarter of 2021
• Hosting a large-scale regtech event in the first to second quarter of 2021
• Hosting a regtech challenge in the form of a hackcelerator-style event in the first to second quarter of 2021
• Developing a regtech skills framework, in the second and third quarter of 2021, that identifies the skills required for different roles to accelerate the adoption of regtech
• Developing Regtech Adoption Index (RAI), in the first to second quarter of 2021, that covers actual adoption, intent to adopt, as well as key enablers for adoption

At the Hong Kong FinTech Week, the HKMA Chief Executive Eddie Yue announced that HKMA is exploring a new data strategy and considering building a new financial infrastructure called Commercial Data Interchange (CDI) to enable more efficient financial intermediation in the banking system and to enhance financial inclusion in Hong Kong. To study the technical feasibility of the CDI, the HKMA is conducting a Proof-of-Concept (PoC) study in collaboration with banks. The PoC focuses on using trade-related data to facilitate trade finance application process and is expected to be completed by the end of 2020. The next phase of the study will begin in 2021 to cover other commercial data sources that could facilitate alternative credit scoring conducted by banks.

HKMA also provided an update on Project Inthanon-LionRock, which is the joint study on the application of a central bank digital currency (CBDC) to cross-border payments conducted by HKMA and Bank of Thailand; this project has entered the second phase. The two authorities aim to explore business use cases in cross-border trade settlement and capital market transactions. The Hong Kong Exchanges and Clearing Limited, 19 participating banks, and five other corporates are going to participate in the project. The two authorities also intend to enhance the cross-border corridor network prototype to support CBDCs of other central banks in the region. They will soon bring banks and large corporates into trials using actual trade transactions. The project findings are expected to be delivered in the first quarter of 2021.

Keywords: Asia Pacific, Hong King, Banking, Regtech, Roadmap, Knowledge Hub, Fintech, Hong Kong Fintech Week, HKMA