On 5 June 2024, the Securities and Futures Commission (SFC) published a speech by its Chief Executive Officer, Ms Julia Leung, on ‘Building a Fintech Ecosystem to Shape the Future of Finance’.
In the speech, Ms Leung focuses on distributed ledger technology (DLT), noting that financial professionals are debating whether it would drive the same scale of revolution in the delivery of financial services as in consumer electronics. She flags that DLT has several useful applications in global finance (such as in virtual assets and trade finance), particularly as a rapidly developing underlying technology for the efficient and secure transfer of real-world assets, which would mean moving financial activities and transactions from traditional infrastructure onto blockchain.
Ms Leung discusses the potential benefits of DLT and of tokenising real-world assets, concluding that tokenisation may bring about wider financial inclusion, fractionalisation, custody and ownership, all on chain. She explains that the same potential benefits and efficiency gains could apply to the world of financial services, where primary issuance, secondary market trading, custody and hypothecation of traditional assets, such as bonds and money market funds, can all be done on chain.
The speech goes on to explain the SFC’s approach and expectations in relation to DLT and virtual asset-related activities. Ms Leung notes that preparations for a new regime to regulate fiat-referenced stablecoins are underway. She also highlights that the next phase of tokenisation is to achieve scale, including a new project on wholesale central bank digital currency which will initially focus on tokenised deposits. There are plans to launch a sandbox to pilot tokenisation use cases, including trading and settlement of tokenised products.