BIS, HKMA to Consider Using DeFi Tools to Enhance SME Financing

The BIS Innovation Hub’s Hong Kong Centre and the Hong Kong Monetary Authority have introduced Project Dynamo, which aims “to deliver a prototype for the compliant use of decentralized finance (DeFi) tools, such as blockchain and smart contracts, to improve access to finance for unfunded and underfunded small and medium enterprises (SMEs).”

The intention is “to enable policymakers and the financial services industry to develop a deeper understanding of whether and how these technologies can reduce transaction and borrowing costs, facilitate productive financing and promote financial inclusion.”

SMEs are “the lifeblood of most economies.”

According to recent World Bank research, they “account for more than 90% of all businesses and contribute to more than 50% of employment globally.”

However, they traditionally “face great difficulties in accessing financing, especially on affordable terms.” The same research also “estimates that about half of these companies have no access to formal credit.”

In developing countries alone, the segment “has unmet financing needs of over $5.2 trillion dollars every year, equivalent to 1.4 times of the current level of global lending to SMEs.” The Covid-19 pandemic “has only exacerbated the situation, leaving millions of businesses on the brink of bankruptcy.”

In addition to project Dynamo, the research will “extend into related topics such as decentralized identifiers and the interoperability of digital payment methods such as stablecoins and central bank digital currencies.”

The use of artificial intelligence and big data to enhance SME credit risk assessment and innovative supply chain financing solutions “are also of interest to us.”

The BIS Innovation Hub is “interested in hearing from companies with working solutions in these areas.”

Project Advisor: Lucy Wong (

As covered, Invest Hong Kong (InvestHK) and the Hong Kong Monetary Authority (HKMA) jointly announced the addition of the Central Bank Digital Currency (CBDC) track to the Global Fast Track 2022, “giving local and global firms valuable opportunities to partner with the central banking institution to boost the growth and adoption of fintech in Asia and beyond.”

The CBDC track “invites banks, fintechs and tech firms to submit innovative solutions in eight focus areas, including retail CBDC (rCBDC) adoption, wholesale CBDC (wCBDC) adoption, programmable money, interoperability, privacy, cybersecurity, foreign exchange and liquidity management, and offline payments.”

Shortlisted applicants will then “enter a pitching session exclusive for the track and compete for three awards, namely the Best Use Case Award, Best Technology Award, and Best Ecosystem Award.”

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