Hong Kong Abu Dhabi trade finance blockchain distributed ledger technology

Hong Kong and Abu Dhabi Agree On Trade Finance Blockchain Cooperation

Hong Kong’s banking regulator is to work with counterparts in Abu Dhabi on a new blockchain platform for cross-border trade finance.

The Hong Kong Monetary Authority, which acts as the de facto central bank in Hong Kong, signed an agreement of cooperation with Abu Dhabi’s Financial Services Regulatory Authority to develop the DLT solution, which aims to streamline trade finance in bilateral supply chains.

The Monetary Authority said the deal would allow the two bodies to work in partnership to explore a range of financial technologies, with a specific focus on opportunities arising from the blockchain.

Their chief fintech officer, Nelson Chow, welcomed the agreement between the two parties.

“We are particularly pleased to start a dialogue with FSRA on the opportunity to build a cross-border trade finance network using distributed ledger technology.”

Trade finance arrangements occur across supply chains, allowing buyers to finance purchases from others in their supply chain and beyond. Distributed ledger technology allows for these arrangements to be automated via smart contracts, as well as providing a range of other benefits for all parties to trade finance arrangements.

The development is the latest move from the Hong Kong Monetary Authority in exploring DLT applications, including specifically for the trade-finance use case.

In 2017, the Hong Kong Monetary Authority partnered up with the Monetary Authority of Singapore to develop a similar technology, which has been undergoing extensive testing since then.

Expected to conclude in early 2019, the tests are thus far reported to have involved some 20 different banks and financial institutions, in a bid to develop a market-ready application ahead of its launch.

Known as the Hong Kong Trade Finance Platform, the technology looks set to form the basis of the present cooperation between the Hong Kong and Abu Dhabi authorities.

“The Financial Services Regulatory Authority of the Abu Dhabi Global Market has indicated interest in the Hong Kong Trade Finance Platform and would like to explore any cross-border cooperative opportunity in this area. The HKMA will continue to have the dialogue with them, including any possible cross-border trade finance infrastructure development between the two markets.”