Hong Kong is looking to allow “a suitable degree” of crypto access to retail investors, and its market regulator will soon kickstart a public consultation for the same, according to a policy statement announced on Monday.
“Hong Kong is open to the possibility of having exchange traded funds (ETFs) on virtual assets in Hong Kong,” the statement said, adding that the Securities and Futures Commission will publish a circular on this “soon”.
The announcement comes with a slew of virtual-asset-related initiatives as part of the government’ broader push to level up the city’s competitiveness as an international financial hub despite overall economic uncertainties, ongoing COVID restrictions, as well as geopolitical tensions continuing to weigh on its economic outlook.
“We want to make our policy stance clear to global markets, to demonstrate our determination to explore financial innovation together with the global, virtual-assets community,” the city’s financial secretary, Paul Chan Mo-po, said during his opening remarks at the Hong Kong Fintech Week 2022 on Monday.
“Meanwhile, a bill to establish a statutory licensing regime for virtual asset service providers is now going through our Legislative Council,” he continued.
New listing regime for crypto platformd
The announcement of the listing regime comes four days after a Bloomberg report stating that a mandatory licensing programme for crypto platforms will be enforced in March next year, citing people familiar with the matter, who asked not to be named as the information is not public yet.
The report said that the regulators are planning to enable “the listings of bigger tokens”, although specific coins like Bitcoin or Ether are not allowed. It added that the details have not been finalised yet as public consultation should come first.
The new listing regime will align requirements for crypto firms in terms of anti-money laundering, counter-terrorist financing, and investor protection with those currently applicable for traditional financial institutions, thereby offering licensed crypto firms the status and credibility to access a wider net of investors in the Hong Kong market, the policy statement explained.
The policy statement added that financial institutions and intermediaries will be able to partner with licensed crypto firms to offer crypto-related services, provided they fulfil the relevant regulatory conditions, so as to tap the city’s wealth management market worth over $4.5 trillion.
Pilot project to explore financial innovation
Besides the new licensing regime, the city plans to launch a number of pilot projects to accelerate the adoption of virtual assets and their application in the financial markets, including NFT (non-fungible token) issuance, green bond tokenisation, and e-HKD, said Mo-po.
“The Hong Kong Monetary Authority (HKMA) is also analysing feedback received on the regulatory approach towards stablecoins and will ensure that it reflects international regulatory recommendations while responding to local circumstances,” the policy statement added.
Responding to the latest policy statement on the development of virtual assets in Hong Kong, Adrian Cheng, CEO of real estate titan New World Development, said there lies a “golden opportunity” on developing a one-stop platform that “incorporate a full universe of tokens, be security tokens, CBDC and NFTs“. He was speaking in a session titled ‘Beyond Crypto and Metaverse: Driving Conversion Between the Digital World to the Physical World’ at the Hong Kong Fintech Week.
“It is high time that Hong Kong provided a regulated, secure, and innovative solution – a platform that offers Web3 peer-to-peer experience without compromising Web2 advantage of investor protection and safety. A common wishlist item from institution funds and family offices is a one-stop, secure wealth management solution that integrates both traditional assets and virtual assets,” he said.
“To address customers’ needs for a single platform that issues traditional securities or mints a security token under proper regulatory approval and investor protection, the same platform should offer regulated trading services, margin financing, and secure products for income generation. As such, customers will be able to safely keep custody of traditional and virtual assets in one hybrid wallet, protected by insurance coverage and relevant regulatory licences,” Cheng added.