Hong Kong central bank confirms in its latest statement entering financial cooperation with its United Arab Emirates counterpart. The cooperation is set to facilitate cross-border settlements, regulate crypto regulation and reinforce the financial relations between the two trade powerhouses.
UAE and Hong Kong Bilateral Meeting Affirms Devotion Towards Cross-border Settlements
The two institutions are set to advance the cooperation in cross-border trade settlements to utilise central bank digital currencies. The agreement reached in the Abu Dhabi bilateral meeting emphasised the need for the two countries to strengthen their financial and trade ties.
The regulation of virtual assets featured in the agenda of the Tuesday, May 30, bilateral meeting held in Abu Dhabi. The parties present deliberated on the financial infrastructure and bolstering cross-border trade payments.
The bilateral agreement comes days after the Securities and Commodities Authority in UAE urged crypto firms seeking operating licenses to apply. A notable achievement is the Hong Kong-based Hex Trust becoming the first firm to secure a crypto custodian license.
The coordinated cooperation received support from Web3-based Finoverse when marking the establishment of the Dubai office. The Hong Kong-based fintech company recently informed The National it anticipates the two countries to work closely in bolstering blockchain technology.
The two regions are set to ease cross-border trade settlements with the possibility of involving central bank digital currencies (CBDC). The adoption of CBDC is set to expedite transfers, lower payment costs and break reliance on the unstable US dollar.
UAE Pursues CBDC Project as Digital Dirham is Underway
The outcome of the bilateral meeting affirms the March announcement by the UAE Central Bank of devoting resources to facilitate the pursuit of the CBDC project. UAE reiterated its objective to complete the initial phase of launching the digital dirham by the first quarter of 2024.
The participants in the meeting were informed that both countries were already collaborating in building blockchain infrastructure capable of supporting multiple CBDCs.
The two countries committed to resolving the limitations experienced in modern cross-border payment systems. As such, the meeting witnessed the successful execution of real corporate transactions in the trial phase.
News of UAE and Hong Kong cooperation is set to battle several challenges. Key among the challenges is the complex future of Hong Kong. Though portrayed as one exercising autonomy until 2047, the region faces the increased presence of China’s tentacles. Recently, China has been gearing towards rapidly installing pro-Beijing candidates in the administrative region.
The pursuit of CBDC by China is entering the final phase. China’s digital yuan is witnessing its pacy introduction to the masses. Changshu City declared in April that civil servants would receive payments through the e-CNY. The announcement marked a critical milestone as the city harbours 1.7 million.
HKMA Piloting Electronic Dollar
Introducing the digital yuan to Hong Kong would take a long time. The Hong Kong Monetary Authority (HKMA) announced its plans to pilot the electronic Hong Kong dollar early in May.
The HKMA announcement revealed that sixteen firms would participate in the pilot study to explore the usage across various functions. The pilot study would involve exploring payments, tokenising deposits, settling Web3-based transactions and tokenising assets.
The chief executive at HKMA, Eddie Yue, lauded the relationship as mutually beneficial given that the two jurisdictions have complementary strengths in economic cooperation. UAE central bank governor Khaled Mohamed Balama led the senior executives from both jurisdictions into a seminar. The seminar explores how UAE corporations can utilise the financial infrastructure in Hong Kong as a gateway to access the Asian and mainland China markets.
Hong Kong’s VASP to Offer Crypto Trading to Retail Investors
The move for the two trade powerhouses to collaborate comes two days before the holders of virtual asset service provider (VASP) licenses begin to serve retail investors on June 1. The Securities and Futures Commission (SFC) in Hong Kong confirmed allowing retail investors to start trading crypto in strict compliance with the new regulatory regime.
Hong Kong’s Treasury executive Christopher Hui confirmed that virtual assets would have an active input in the administrative region. He added that using cryptos is set to outweigh the inherent risks.
Hui admitted that virtual assets present fundamental value that, when harnessed through regulation, would become beneficial. Allowing crypto activities within a regulated context would harness the benefits while eliminating the risks involved.
The treasury chief’s confession coincides with the HKMA executives confirming receiving several applications from various crypto exchanges, including OKX, Huobi and CoinEX. The firms seek licenses to offer crypto trading services in Hong Kong.
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