In recent years, the financial services industry has witnessed a significant transformation, driven by the emergence of innovative technologies that are redefining the way institutions operate, interact with customers, and manage risk. Among these technological advancements, Distributed Ledger Technology (DLT) has garnered significant attention for its potential to enhance transparency, efficiency, and security in financial transactions.
To gain a deeper understanding of the practical applications of DLT, the HKMA has conducted a series of in-depth interviews with key stakeholders from 10 organisations across the banking, securities, and insurance sectors that have implemented DLT in various capacities. The interviews aimed to explore three key aspects: (1) the solution mechanism employed, (2) the rationale behind adopting DLT, and (3) the DLT-specific challenges encountered.
1. Banking: Payments, Tokenization & Trade Finance
Hang Seng Bank – Hypothetical e-HKD for Merchant Payments
- Uses programmable payments via smart contracts to automate voucher redemption.
- Ensures instant settlement and automatic reconciliation for merchants.
- Reduces manual processes for merchants and improves customer experience.
HSBC – Tokenized Deposits for Cross-Border Fund Transfers
- Enables 24/7 fund transfers between HSBC locations.
- Tokenized deposits allow instant settlement, improving foreign exchange (FX) clearing.
- Reduces reliance on traditional payment rails like SWIFT and RTGS.
Linklogis & Standard Chartered – Digital Trade Token for Supply Chain Finance
- Uses stablecoins as conditional payments in supply chain transactions.
- Allows suppliers to liquidate stablecoins at a discount to investors for financing.
- Provides real-time transparency into downstream payments, improving trust.
Wecan Group – Wecan Comply for Secure KYC Data Sharing
- A private DLT network for financial institutions to share compliance data securely.
- Allows multiple banks to access updated KYC/KYB data simultaneously.
- Improves security, efficiency, and regulatory compliance.
2. Securities: Asset Tokenization & Digital Identity
Deutsche Bank & Memento Blockchain – Digital Identity (Project DAMA 1)
- Uses Soulbound Tokens (SBTs) to verify investor KYC/AML credentials.
- Allows investors to access multiple funds with a single digital identity.
- Reduces onboarding time and eliminates repetitive KYC processes.
HKEX & Digital Asset – Synapse for Stock Settlement
- Improves Northbound Stock Connect by enabling simultaneous approvals.
- Enhances cross-border A-shares trading by reducing settlement delays.
J.P. Morgan – Digital Financing on Kinexys Platform
- Enables secured financing using tokenized collateral.
- Supports intraday, overnight, and term lending through automated settlement.
UBS – UBS Tokenize for Digital Asset Issuance
- Allows investors to buy tokenized securities with smaller ticket sizes.
- Reduces settlement risks and enables direct peer-to-peer trading.
3. Insurance: Automating Claims & Fraud Prevention
Allianz – Cross-Border Claims Settlement
- Uses DLT to streamline motor insurance claims across 25 European countries.
- Automates claim approvals and payment settlements, reducing delays.
HKFI & CryptoBLK – MIDAS for Motor Insurance Authentication
- A DLT-based verification system for motor insurance policies in Hong Kong.
- Prevents fraud and enhances real-time policy authentication.
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