Blogs
Attributed to Mimi Poon, General Manager, IBM Hong Kong
Attributed to Mimi Poon, General Manager, IBM Hong Kong
The virtual assets market has experienced remarkable growth in recent years, reaching a staggering global market value of US$1,076.6 billion in January 2023, as reported by the Hong Kong Stock Exchangei. Hong Kong has emerged as a prominent player in this dynamic field, actively promoting and investing in the digital asset revolution.
While the growth of the virtual asset market presents exciting opportunities, it also brings cybersecurity and regulatory challenges. Regulators are closely collaborating with industry players and technology providers to seize these opportunities while ensuring consumer protection and fair business practices. Hong Kong addressed these regulatory gaps with the implementation of the Virtual Asset Licensing Regime on June 1, 2023, providing a one-year grace period for existing local virtual asset operators and ISVs to prepare themselves to comply with the new regulation. In this way, Hong Kong could be the only place within Greater China that could trade virtual asset officially through the licensed trading platforms like the other leading international financial centers around the world under the “same business, same risks, same rules” principle.
The following are some principles that FinTechs should bear in mind to seamlessly enter the world of highly regulated industries – while maintaining their fast pace of innovation.
- Proactive compliance: Compliance with Know Your Customer (KYC), Anti-Money Laundering (AML), and Counter-Terrorism Financing (CTF) requirements is crucial for industry legitimacy in the eyes of institutional investors. FinTechs should take a proactive approach to compliance, anticipating future regulations and seeking expertise and technology partners with deep experience in this space to stay up-to-date with evolving requirements.
- Seek out the right skills: The new regulations are also causing developers and technical professionals to expand their skillsets to take advantage of hybrid cloud, confidential computing solutions and security capabilities including cryptography technologies for data privacy. For instance, confidential computing keeps data encrypted even during processing, reducing vulnerabilities, which benefits banks running workloads in public clouds. As FinTechs start to face more stringent regulations, they can also benefit from these technologies.
- Cross-boundary collaboration: Collaboration is key to success. Rather than a "homegrown" approach, being part of a strong and highly scalable ecosystem built on open technologies with a common set of standards will make a big difference. Working together with technology partners, industry experts, and regulatory bodies enables FinTechs and financial institutions to shape and seize opportunities in this fast-growing market.
Technologies to unlock the full potential of virtual assets
Having explored the best practices for navigating the highly regulated space, it is crucial for industry players to leverage cutting-edge technologies to unlock the full potential of virtual assets. By embracing innovative technology solutions, both financial institutions and FinTechs should not only overcome compliance hurdles but also capitalize on the abundant opportunities that virtual assets offer.
- Cryptography solutions for today and tomorrow: In the world of virtual assets, everything is protected by a cryptography key that should be kept inside the digital custody, similar to a wallet concept. Therefore, virtual asset owners must protect their digital custody without giving away control that could potentially lead to asset loss. IBM provide secured cryptography solutions, including Hardware Cryptography solutions on premise (LinuxONE) and the IBM Cloud Hyper Protect Crypto Services. IBM is also at the forefront of developing Quantum-Safe Cryptography, the next generation of cryptography solutions that reduce the risk of virtual assets being decrypted using quantum computing technology.
- Risk Management & Operational Management Control Tools: Organizations can use technology to automate and improve their processes of identification, measurement, monitoring, analysis and administration of operational risk and controls, allowing institutions to address the challenges associated with the rise of virtual assets, such as the potential for illegitimate transactions, for example. Artificial intelligence (AI) can accelerate risk management adoption and support the business and technical teams. For instance, AI-powered virtual assistants could help users alleviate the burden of understanding daunting taxonomies by providing suggestions and instant answers, available 24/7.
- Open technology platform with built-in security and controls to ensure the right supply chain: To accelerate innovation and deliver better customer experiences, organizations need to strengthen their processes and ensure that security and compliance needs are covered. IBM Cloud for Financial Services is one of the successful platforms that aims to help reduce risk throughout the supply chain by addressing resiliency, performance, security, and regulatory compliance. Security and controls are built into the platform to enable financial institutions to automate their security and compliance posture. Only ISVs and SaaS providers that are validated to be in alignment with the IBM Cloud Framework for Financial Services are eligible to deliver offerings on the platform. Leading global institutions leverage the IBM Cloud for Financial Services, and more than 130 technology providers and FinTech's are among its growing ecosystem.
Collaborate with IBM to lead the change
To drive transformation and seize the opportunities presented by Hong Kong's virtual asset landscape, it is essential for all key stakeholders to come together and adapt to the changes. IBM is committed to supporting industry growth and fostering continuous innovation in this area. Through the IBM Partner Plus program, FinTechs can access market-leading support and technical skilling in hybrid cloud, AI, security and sustainability, while local universities and vocational training organizations can join as IBM SkillsBuild Partners, providing students with digital credentials, software access, expert conversations, and hands-on learning. In shaping the future success of Hong Kong's virtual asset industry, IBM is committed to helping our clients and business partners in the market with our technologies and industry expertise.
About the blog author
Mimi Poon is the General Manager of IBM Hong Kong, responsible for the IBM business in Hong Kong and Macao region. She leads the company to assist clients in digital transformation by adopting a hybrid cloud and AI platform.
In 2021, Mimi was the Hong Kong Technology Leader overseeing the full spectrum of IBM Technology and Services brands, driving end-to-end digitalization and innovation with cutting-edge integrated solutions for clients across industries. From 2014 to 2020, Mimi was Director, Banking and Finance, leading IBM Hong Kong’s business in the financial services sector. She is responsible for IBM’s relationships with financial services firms, helping them transform their businesses to increase efficiencies while creating customer value within the rapidly changing regulatory, business and technology landscapes. Before that, she was IBM Global Client Director for HSBC, supporting the client’s business operations across the globe. Mimi is also an IBM Industry Academy member and a trusted advisor and partner to banks in the Greater China region.
Besides her IBM role, Mimi is a member of the Advisory Committee of the Department of Systems Engineering and Engineering Management of The Chinese University of Hong Kong, the Advisory Committee of the IT Innovation Lab in School Programmes under the Office of the Government Chief Information Officer, and the ICT Services Advisory Committee of the Hong Kong Trade Development Council. She is also a council member and Director of Highly-skilled Professional Development of the Hong Kong Computer Society.