Hong Kong Monetary Authority Initiates Preparation for Retail CBDC

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BitGo, a company that specializes in cryptocurrency custody, has struck a tentative deal to acquire Prime Trust, another company that specializes in cryptocurrency custody and is allowed by Nevada law. The second source withheld information about the deal’s financial details. Following the publishing of this story, BitGo acknowledged in a blog post that Prime Core Technologies, the parent business of Prime Trust, had been the subject of a term sheet it had signed. The decision, according to BitGo CEO Mike Belshe and Prime Trust Interim CEO Jor Law, is “a significant enhancement for the industry” and will enable the company to better serve the combined client base and offer best-in-class, dependable solutions. Digital asset custody has become quite popular, with several varieties on the market and companies commanding significant values, due to the need for safeguarding and storing bitcoins. Midway through 2022, Prime Trust secured $107 million in investment, but recent news has not been encouraging. At the end of January, the company said it was laying off a third of its staff and ceasing operations in Texas, where it was applying for a money transmitter license.

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New bank capital regulations may be supported by European Union (EU) governments, making unbacked cryptocurrency the riskiest asset for lenders. The EU Council is open to steps that would separate cryptocurrency from the financial system, which is supported by the European Parliament. Swedish diplomat Mats Anderson thinks the commission document provides a solid foundation for future action. By enabling lower risk weights for stablecoins governed by MiCA, which goes into force in 2024, the European Commission suggested to reduce the risk weight of crypto assets. The financial package has been difficult, but authorities now seem to believe a solution is close at hand. At a meeting set on June 15, Anderson stated that a political agreement may even be feasible.

According to the Hong Kong Monetary Authority (HKMA), the foundation for the implementation of a retail central bank digital currency will soon be laid. The HKMA has been persuaded by a recent research and feedback from two rounds of market consultation that it is essential to begin laying the groundwork for potential retail Central bank digital currencies (CBDC) adoption in the future. The Hong Kong regulator may be inclined to develop the e-HKD on a permissioned blockchain, but the regulator will be taking “various factors” into account, such as policy goals and legal frameworks already in place, as well as further investigating technically workable solutions. The Bank for International Settlements has made it clear that in order to keep financial institutions stable, it is crucial to look into their digitalization.

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