The Hong Kong government issued a crypto policy statement that clarified its plans to develop “a vibrant sector and ecosystem” for the nascent industry on October 31.
The policy statement marks a key change for the government, which had recently revealed intentions to allow retail traders to invest directly in crypto.
Hong Kong crypto regulations
The authorities have launched a regulatory body that licenses virtual asset exchanges using an “opt-in” approach. The statement continued that the government has also provided guidance for banks and other financial institutions giving crypto-related products.
According to the policy statement, licensed exchanges would operate in compliance with necessary anti-money laundering, counter-terrorist financing (AML/CTF), and investor protection laws. This would allow them “to access a wider net of investors in the Hong Kong market.”
Hong Kong’s Securities and Futures Commission (SFC) will conduct a public consultation to determine the crypto exposure level that retail investors would be granted. At the same time, the government has hinted that it would welcome crypto-related Exchange Traded Funds (ETFs) in its jurisdiction.
Stablecoins and property rights
The Hong Kong government stated that stablecoins “have a growing potential for significant interconnectedness with the traditional financial markets, e.g., in the payment system.”
Going by this, the Hong Kong Monetary Authority is seeking feedback on a discussion paper that aims to regulate activities of payment-related stablecoins. According to the policy statement, more information will be provided soon.
Meanwhile, the Hong Kong government conceded that its current private property law might not apply to virtual assets as they have unique characteristics that differentiate them from traditional investments.
However, the government is willing to review its law provisions to bolster the adoption of tokenized assets and determine the legality of smart contracts.
Hong Kong to launch various pilot schemes
The government is also exploring various pilot projects that maximize the technological advantages of virtual assets.
According to the statement, the government is working on projects like NFT issuance for Hong Kong Fintech Week (HKFTW) 2022, Green bond tokenization, and a central bank digital currency (CBDC) e-HKD.
The government stated that it was willing to embrace the underlying technologies of virtual assets and promote the benefits in its jurisdiction. It continued that it welcomes the “clustering of Fintech and VA community and talents in Hong Kong.”
Crypto community approves Hong Kong move
The Hong Kong government policy statement has elicited positive responses from the crypto community, who hailed it as a welcome development.
1) A really promising update from HK on crypto: https://t.co/rXLpORfUvT
If only it had come last year…
— SBF (@SBF_FTX) October 31, 2022
FTX founder Sam Bankman-Fried deeply appreciates “when policymakers engage constructively and optimistically with the people who matter the most for an industry’s direction.” He added that he wished the plan had come last year.
The CEO of New World, Cheng Zhigang, said Hong Kong could become the only place in China where virtual asset services are legal because of its advantages of one country and two systems.