In a recent bilateral meeting held in Abu Dhabi, the central banks of Hong Kong and the United Arab Emirates (UAE) expressed their commitment to strengthening financial cooperation. The meeting agenda included discussions on financial infrastructure, cross-border trade settlements, and regulation of virtual assets.
Last month, the UAE’s Securities and Commodities Authority initiated the process of allowing cryptocurrency firms to apply for operating licenses. Hong Kong-based crypto custodian, Hex Trust, was among the first recipients of this license. Furthermore, the Central Bank of the UAE announced its ambitious plans for a central bank digital currency (CBDC), with the first phase of a digital dirham set to be completed within a year.
Hong Kong and the UAE have been collaborating on the development of mBridge, a blockchain platform designed to support multiple CBDCs and address the limitations of existing cross-border payment systems. As part of a trial, real corporate transactions have been conducted using mBridge. This collaborative effort indicates a shared interest in exploring the potential of CBDCs for cross-border trade settlements, which could lead to faster transfers, reduced costs, and decreased dependence on the U.S. dollar.
While Hong Kong is intended to have a high degree of autonomy until 2047, concerns have been raised about the influence of pro-Beijing candidates in positions of power. Meanwhile, China is progressing rapidly with the development of its own CBDC, the digital yuan. The digital yuan has been gradually rolled out to the public, with civil servants in the city of Changshu being fully paid using the e-CNY. However, Hong Kong has recently announced a pilot for an electronic form of the Hong Kong dollar, indicating that the digital yuan may not be introduced in the region in the near future.