The Hong Kong Monetary Authority (HKMA) has recently introduced a new initiative to help local banks develop blockchain-based solutions, with a special focus on digital assets. Described as a “new regulatory framework,” the initiative aims to enable banks to maximize the potential of distributed ledger technology (DLT) while effectively managing the associated risks.
Officially named the “Supervisory Sandbox for Distributed Ledger Technology,” the initiative is designed to address risks that may arise as banks adopt blockchain technology on a broader scale. Particular attention will be given to digital assets.
This new sandbox is the latest in a series of initiatives by the HKMA targeting digital assets and blockchain technology. Earlier this year, the authority launched a Stablecoin Protection Fund in March, partnering with major firms such as Standard Chartered, Animoca Brands—an industry leader in the metaverse—and a subsidiary of the e-commerce giant JD.com. In August, the HKMA introduced another protection fund to support “Project Ensemble,” a collaborative effort involving global players like Microsoft, Standard Chartered, and HSBC.
What sets the new sandbox apart from previous initiatives is its focus on allowing banks to conduct self-assessments of their risk management frameworks for blockchain technology. It also provides an environment for practical experimentation to refine and improve these frameworks. Additionally, the HKMA will offer supervisory guidance to participating banks.
Arthur Yuen, DCEO of the HKMA, emphasized the importance of fostering innovation in the fast-evolving banking sector. “In a rapidly changing financial landscape, it is crucial to provide an enabling environment for innovation. The Supervisory Sandbox for Distributed Ledger Technology is a key part of our strategy to encourage the development of secure, efficient, and innovative banking solutions that benefit the industry and society at large,” Yuen stated.
The sandbox will also serve as a platform for sharing best practices and enhancing industry awareness. The HKMA plans to organize workshops, provide supervisory insights, and support research initiatives as part of the program.
Ultimately, this initiative aligns with Hong Kong’s ambition to strengthen its position as a leading global hub for digital assets. The city has already established itself as a front-runner in this field, with local banks such as Standard Chartered and HSBC actively embracing blockchain technology. Notably, HSBC issued Hong Kong’s first-ever private digital bond worth HKD 1 billion (USD 130 million) in October 2024, followed by another digital bond worth HKD 750 million earlier this year, further solidifying the city’s role as a financial innovation center.
