Hong Kong Fintech Week: User Privacy, Bitcoin ETFs and CBDCs
Hong Kong Fintech Week kicked off as a hybrid event Wednesday, and Blockworks was there virtually.
Blockworks exclusive art by Axel Rangel
- China’s PBoC stands up for user privacy vs. big tech
- 140 million people have used China’s CBDC
Hong Kong Fintech Week — As Hong Kong is China’s outward-facing financial center, Hong Kong Fintech Week serves as a sort of state of the union for developments in China’s fintech space.
Given that Hong Kong is sacrificing its connections with the world with hopes that Beijing opens up a quarantine-free path to mainland China, the event continues to take a very China-specific theme — and one that business alignment authorities in both Hong Kong and Beijing seem to prefer. It was at Hong Kong Fintech Week 2019 that China fleshed out the plan for its CBDC, and where Hong Kong’s security regulator, the Securities and Futures Commission (SFC), announced its first legal guidance for crypto custody.
PBoC chief warns big tech about privacy
The Day 1 opening keynote speech, delivered by People’s Bank of China (PBoC) Governor Yi Gang, wasn’t about developments in China’s digital yuan — one of the most-watched topics by the foreign press — but rather about strengthening China’s digital privacy laws to keep big tech’s demand for data in line.
“Big data is at the heart of the above-mentioned technologies. The companies that have large data traffic could accumulate data, and acquire new customers,” Yi said in remarks streamed from Beijing. “They could enjoy steady data flow if customers remain loyal. As a result, big techs have increasingly gained an upper hand in assessing, using and storing data.”
Even though Yi did not name Ant Group, it’s important to view these remarks in context to Beijing’s annoyance with Ant Group and Jack Ma. Ant Group’s ubiquitous super-app commands a considerable amount of retail payment volume within the country, so much so that some experts have argued that China’s push to introduce a CBDC is about wrestling away control of the nation’s money supply from the company.
Ma himself has been a vocal critic of China’s “anachronistic” regulations while Chinese antitrust cops debate behind closed doors if the company needs to be carved up into smaller firms.
But, again, at the core of this, is data — the lifeblood that Ant Group runs on — which is something the PBoC can regulate without a fight that spooks investors.
“Protection of personal privacy is a must, when each and every one of us has a record in data. Some big techs have either collected data without permission or misused them,” Yi said, citing the success of the EU’s General Data Protection Regulation (GDPR) regime. “There are also cases of customer data leakage. Therefore, it is urgent to strengthen personal data protection.”
Yi didn’t introduce new legislation on stage or set a timeline for when to expect something. Instead he said, “Going forward, we will continue to improve the legal framework for personal data protection in the financial sector and strengthen regulation accordingly.”
Hong Kong bitcoin ETF?
The short answer is that the Hong Kong SFC doesn’t have an answer yet for investors eager for a listed local crypto product.
As of now the SFC is reviewing its crypto legislation to see if it’s compatible with the concept of a bitcoin ETF, Julia Leung, the SFC’s Deputy Chief Executive Officer said on stage. Hong Kong limits the sale of cryptocurrency to professional investors, which would severely limit the market for a bitcoin ETF in the territory.
Indeed, the whole appeal of bitcoin ETFs is for retail investors to get exposure to crypto via a regulated structure.
While Leung didn’t have an answer as to when a bitcoin ETF might be approved — or formally denied — in Hong Kong, she did say that the SFC has received multiple requests from large ETF issuers on the possibility of a bitcoin ETF on Hong Kong’s exchange. But until the SFC releases more concise guidance on the topic, it’s impossible to say if there will be a Hong Kong bitcoin ETF.
140 million wallets
One hundred and forty million wallets — 10 million of those from retailers or other corporations — have been created to use China’s eCNY, the world’s first functional CBDC, according to Mu Changchun, director-general of digital currency research at the PBoC.
Of the 10 million corporate accounts created, there are 1.55 million merchants currently on the platform including retailers, utilities, government services and transportation providers. China’s vast train network has accepted the eCNY since late last year as have many city’s subway systems.
But Mu didn’t give an official launch date for China’s eCNY. It is widely expected to make its debut at the 2022 Winter Olympics Beijing and surrounding areas in February because PBoC officials and event organizers were hoping to first introduce it to foreign visitors as a way to save on international currency exchange fees or the uncertainty of foreign-issued credit cards not working in-country.
However, due to Covid-19, international visitors will not be allowed at the games, making it uncertain if it will be the venue for the technology’s grand debut.