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(Kitco News) - Economic ties between Asia and the Middle East continue to deepen as the central banks of Hong Kong and the United Arab Emirates (UAE) have agreed to collaborate on cryptocurrency regulations and financial technology development.
According to a press release from the Hong Kong Monetary Authority (HKMA), the central bank held a bilateral meeting with the Central Bank of the United Arab Emirates (CBUAE) on Monday to discuss enhancing collaboration between their respective financial services sectors.
“We are pleased to have welcomed the Hong Kong Monetary Authority and its delegation to the UAE as we look to build on our central banks’ existing and robust relations,” said H.E. Khaled Mohamed Balama, Governor of the CBUAE. “We look forward to a longstanding engagement with the HKMA and the Hong Kong financial services sector more broadly, and we will continue collaborating with and exchanging knowledge in these mutual areas of interest.”
The meeting explored a variety of “collaborative initiatives,” and the central banks agreed to strengthen collaboration in the areas of financial infrastructure, financial market connectivity between the two jurisdictions, and virtual asset regulations and developments. They also “facilitated discussions between their respective innovation hubs on joint fintech development initiatives and knowledge sharing efforts.”
“These events enhanced the collaboration between the central banks of Hong Kong and the UAE in a number of important areas, and provided a platform for financial institutions and corporates from Hong Kong and the UAE to step up exchange and collaboration,” said Eddie Yue, Chief Executive of the HKMA. “Hong Kong and the UAE are two financial centres sharing many complementary strengths and mutual interests, and there is much room for market participants from these two places to work together and build up the connectivity.”
To move the initiatives forward, a joint working group led by the CBUAE and HKMA, with support from the relevant stakeholders of the two jurisdictions’ banking sectors, will be formed, the announcement said.
After the meeting was over, the central banks and senior executives from the UAE and Hong Kong banks held a seminar that included discussions on possible arrangements to facilitate better cross-border trade settlement, and talks on how UAE corporates can better utilize the Hong Kong financial infrastructure platforms to access Asia and the Mainland markets. The seminar also explored financial and investment solutions and capital markets opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area (Greater Bay Area).
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CBUAE issues KYC/AML guidance for crypto
In a follow-up to their meeting with HKMA, the CBUAE issued new guidance for anti-money laundering (AML) and Combating the Financing of Terrorism (CFT) measures for crypto businesses. The guidance outlined the risks that arise when dealing with virtual assets (VAs) and virtual asset service providers (VASPs) and outlined the rules that VASPs need to follow to remain in compliance with local laws.
Aside from laying out the standard requirements for VSAPs and licensed financial institutions (LFIs) that serve VASPs – such as the requirement to verify identity, report suspicious transactions, and register as a VASP provider – the CBUAE also stressed that virtual assets are not considered legal tender in the UAE.
“The CBUAE does not accept or acknowledge virtual assets as a legal tender/currency in the UAE; rather, the only legal tender in the UAE is the UAE dirham,” the guidance said. “As such, those accepting VAs as payment for goods and services or in exchange for other assets bear any risk associated with the future acceptance or recognition of VAs.”
“The new guidance related to the virtual assets sector contributes to strengthening the supervisory and regulatory frameworks of the Central Bank to combat money laundering and the financing of terrorism,” Balama said in a written statement. “We are constantly working to enhance efforts and strengthen the awareness of licensed financial institutions to prevent all kinds of financial crime activities, and reduce potential risks to protect the financial and monetary system and maintain its soundness and stability, in line with the Financial Action Task Force standards.”
The new rules outlined in the guidance are scheduled to take effect in one month. The move will affect all LFIs in the United Arab Emirates, including banks, finance companies, exchange houses, payment service providers, registered hawala providers and insurance companies, agents and brokers.
