Central Bank Digital Currency (CBDC) Research Studies

The HKMA commenced in late March 2017 a research and a proof-of-concept work on CBDC in collaboration with the three note-issuing banks, the Hong Kong Interbank Clearing Limited and R3, a consortium of financial institutions and other stakeholders to explore the potential of DLT. The objectives of the studies are to assess the potential benefits, challenges and implications of issuing CBDC. The first phase of the research, which explores the feasibility of CBDC in performing domestic inter-bank payments, inter-corporate payment in the wholesale market and delivery versus payment debt securities settlement, is expected to be completed in the fourth quarter of 2017. Subject to the findings of the first phase, the HKMA will decide on the appropriate next step.

Cybersecurity Fortification Initiative (CFI)

The CFI was launched by the FFO as its first initiative, which was fully rolled out in December 2016, with a view to raising the cyber resilience of our banking system. The initiative is underpinned by three pillars:

I. a Cyber Resilience Assessment Framework (C-RAF) to establish a common risk assessment framework for banks;

II. a new Professional Development Programme (PDP) to offer trainings and qualification certifications in cybersecurity for assessment and testing under C-RAF; and

III. a Cyber Intelligence Sharing Platform (CISP) to facilitate sharing of cyber threat intelligence.

The C-RAF will be implemented by batches. A circular regarding the implementation details was issued by the HKMA on 21 December 2016. The first batch of 30 AIs are required to complete the assessment and the simulation test by September 2017 and June 2018 respectively. Depending on industry feedback and the experience gathered from the first phase, all the remaining AIs will be expected to complete the assessment by end-2018 in the second phase.

An industry expert panel was formed to identify a list of equivalent qualifications for the PDP, recognising relevant or equivalent experience and expertise in the cybersecurity field. Meanwhile, the Hong Kong Institute of Bankers was the first organisation to deliver relevant PDP training and examination.

The first version of the CISP was launched in December 2016. All banks can now access cybersecurity information on the platform. The operator of the CISP will continue updating and enhancing the functionality, allowing banks to share their cybersecurity intelligence on the platform.

Distributed Ledger Technology (DLT) Research Studies

The HKMA launched a comprehensive research on DLT. The Hong Kong Applied Science and Technology Research Institute (ASTRI) was commissioned for the first stage research and published a whitepaper in November 2016. The Whitepaper discusses the potentials of DLT for the financial services and identified some possible challenges related to governance, risk management, compliance, legal issues and the actual deployment of DLT solutions. Click here to download the first Whitepaper.

In October 2017, the HKMA published Whitepaper 2.0 on DLT to deliver the results of the second stage of the research. The second Whitepaper confirms the promising nature of DLT while acknowledging that DLT is not a universal solution for all financial applications. It also addresses governance, legal and compliance implications and general control principles for DLT for the banking and payment industry, and offers corresponding advice from experts. The second Whitepaper delivers more detailed findings from the three proof-of-concept trials, namely trade finance, digital ID management and mortgage loan applications, along with assessment on whether some of these works can be put into action. Click here to download the second Whitepaper.

Open Application Programming Interface (Open API)

In view of the worldwide developments in Open API, where financial institutions allow their internal IT systems and data to be opened up for programmatic access by third-party service providers or its counterparts in an open and documented manner, the HKMA will formulate a policy framework on Open API to facilitate the development and wider adoption of API by the banking sector, thereby stimulating innovations and improving financial services through collaboration between banks and tech firms. The HKMA expects the policy will be finalised around the end of 2017.