Hong Kong’s New Crypto Policy Is Cautious – Ledger Insights

At the start of Hong Kong Fintech Week, the Hong Kong government today issued a policy statement on cryptoassets, showing a cautious but slightly more open approach to what it refers to as virtual assets (VA).

The first pillar of the policy is a plan to regulate service providers in addition to the existing opt-in regulation of crypto exchanges.

Second, the Securities and Futures Commission will conduct a public hearing on how retail investors can be given an “appropriate degree” of access to crypto. It also acknowledges that ETFs have been permitted in other jurisdictions and is “open to the possibility” in Hong Kong.

Finally, it will review property rights for tokenized assets and explore the legality of smart contracts.

The government also highlighted pilot projects such as NFTs at Hong Kong Fintech Week, its eHKD CBDC and green bond initiatives.

“The government is willing to embrace this future and we welcome the clustering of Fintech and VA communities and talents in Hong Kong, and we will promote the sustainable development of financial services across the VA value chain,” said Christopher Hui, Secretary of financial services and the Treasury.

The policy statement described “the entire VA value chain, covering VA issuance, tokenization, trading and settlement platforms, funding and asset management and custody.”

Remember that some crypto firms in Hong Kong moved to Singapore, which itself announced a conservative set of consultations last week. For example, Singapore is considering imposing knowledge and education requirements on non-accredited investors before they can invest in cryptocurrencies.

Allows banks to interact with crypto service providers

Hong Kong emphasized its adherence to the principle of “same activity, same risk, same regulation”. It says it plans to regulate service providers for AML and investor protection in a similar way to what “currently applies to traditional financial institutions”.

The upside of this increased oversight is that “financial intermediaries and banks will be able to work with licensed VA exchanges.”

The government’s caution is highlighted by its own description of the opportunities offered by crypto, which emphasizes the metaverse, tokenized real-world values ​​and CBDC.

“Hong Kong is showing signs of a vibrant VA ecosystem, as demonstrated by NFT issuance in our market, presence of Metaverse developers and use of DLT in trade finance etc,” the policy statement said. “Additional opportunities can be realized if we look further into more applications, such as the trade of art and collectibles, the tokenization of vintage goods, or in the case of financial innovations, the tokenization of a wide range of products such as debt securities.”