Hong Kong releases pro-crypto budget, signals increased CBDC integration with China

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(Kitco News) – Hong Kong released its 2023-2024 budget on Wednesday, and in his accompanying speech, Finance Secretary Paul Chan reaffirmed some of his government’s recent pro-crypto initiatives and announced new areas of support for the digital asset industry.

Addressing the potential of Web3 for the Special Administrative Region (HKSAR), Chan was very positive about the technology.

“Each generation of technological reform brings new applications and new opportunities, and even disrupts business operations,” Chan said, adding that while he considers Web3 still “in its infancy,” he sees great potential. before. “We must keep up with the times and seize this golden opportunity to be at the forefront of innovation development.”

Chan said the government will allocate HKD$50 million ($6.5 million) to Web3 Cyberport “to accelerate Web3 ecosystem development” through such activities as hosting international seminars that “enable industry and enterprises to better understand cross-border development and promote cross-sectoral development” business cooperation” together with workshops for young people.

He also addressed Hong Kong’s recent move to prepare legislation that would regulate cryptocurrencies, calling virtual assets (VA) “an integral part of a vibrant Web3 ecosystem.” Referring to the government’s October policy statement on VA, he noted that the market reacted proactively.

“In recent months, a large number of innovative companies with potential have considered establishing operations in Hong Kong,” he said. “For the next step, I will establish and lead a working group on VA development, with members from relevant policy agencies, financial regulators and market participants, to make recommendations on sustainable and responsible development of the sector.”

Chan also said that Hong Kong would move forward with efforts to integrate China’s CBDC with its own program. “We will continue to continue the application testing and preparatory work for various financial technology (Fintech) infrastructure projects, including ‘e-HKD’ and ‘e-CNY’ as cross-border payment facilities,” he said.

Activity related to the digital yuan has increased in recent months. In early January, the People’s Bank of China (PBoC) included e-CNY in its official cash reports for the first time, with the digital fiat accounting for 13.61 billion yuan (about $2 billion) in circulation. This figure represents about 0.13% of the 10.5 trillion yuan in circulation at the end of December.

In January, the PBoC released an update indicating that the central bank plans to continue expanding the e-CNY pilot program to allow further testing and exploration of possible applications of a digital RMB across the country and to “realize the interconnection of the digital renminbi system and traditional electronic payment tools.”

Hong Kong has made many headlines in recent weeks as it continues to push forward with blockchain technology initiatives. Last week, rumors began to circulate that the government was preparing crypto legislation to be passed this year, and on Monday the Securities and Futures Commission (SFC) launched a public consultation on “the requirements for operators of virtual asset trading platforms” ahead of the new licensing regime coming into force 1 June 2023.

Tuesday saw reports that Beijing has given behind-the-scenes support to Hong Kong’s crypto ambitions, with sources telling Bloomberg that representatives from China’s Liaison Office and other officials have been regular attendees at Hong Kong’s crypto gatherings in recent months and have adopted a friendly meeting. approach to cooperation with companies.

This perceived openness has led to an influx of mainland and overseas crypto firms that are now pushing to register their businesses and return to Chinese territory more than 15 months after Beijing banned the industry, forcing many to set up their businesses overseas.

Under the new licensing regime announced on Monday and scheduled to take effect on June 1, all centralized crypto-trading platforms operating in Hong Kong or actively marketing to Hong Kong investors will need to be licensed by the SFC. The proposed regulatory requirements for virtual asset trading platforms are based on the requirements of the existing Securities and Futures Regulation.