The China Securities Regulatory Commission will make technological innovation centered on virtual assets one of its key development focuses.

Source: Hong Kong Securities and Futures Commission

Editor: Bowen

Hong Kong's goal has always been to solidify its position as a global financial center. In the past few years, changes in policies and the global economic environment have led to Hong Kong being dubbed a "financial wasteland," prompting the Hong Kong government to relax its policies and strive to promote development from various aspects to aid in Hong Kong's recovery.

On January 24, the Hong Kong Securities and Futures Commission released its "Strategic Focus for 2024 to 2026," which mainly includes four major aspects:

(i) Maintaining market resilience and mitigating severe damage to the market;

(ii) Enhancing the global competitiveness and attractiveness of the market capital;

(iii) Leading the transformation of the financial market with technology and ESG (i.e., environmental, social, and governance); and

(iv) Enhancing institutional resilience and operational efficiency.

The document indicates that the Securities and Futures Commission will make technological innovation centered on virtual assets one of its key development focuses. It will provide regulatory guidance on new virtual asset activities, promote the development of regulatory systems for virtual asset trading platforms, safeguard investor interests while supporting the tokenization of traditional products, promote the establishment of a responsible and secure financial technology ecosystem using blockchain and Web3 basic technology, and establish closer ties with local and international law enforcement agencies to combat crimes.

The following is the original text of the strategic focus.

Introduction

The global market is complex and ever-changing, with tense geopolitical situations and rapid technological advancements, all of which bring unprecedented challenges and opportunities to Hong Kong's financial market. We understand the issues of widespread concern in the market and recognize the importance of collaborating with the industry to jointly address risks and seize opportunities. At the same time, we will continue to strengthen efforts to combat financial crimes to prevent harm to investors and the market.

The Securities and Futures Commission has always spared no effort to fulfill its statutory responsibilities and adhere to principles, with the mission of regulating Hong Kong's securities and futures markets and safeguarding the interests of the general investors. Our statutory objectives include:

• Maintaining and promoting the fairness, efficiency, competitiveness, transparency, and orderliness of the securities and futures industry;
• Assisting the public in understanding the operation of the securities and futures industry;
• Safeguarding the interests of the general investors;
• Minimizing misconduct and improper behavior within the industry;
• Reducing systemic risks in the securities and futures industry; and
• Assisting the Hong Kong Special Administrative Region Government in maintaining the financial stability of Hong Kong.

To respond to the rapidly changing market conditions, we must establish strategic focuses based on the above responsibilities and lead market development to uphold Hong Kong's reputation as a world-class financial center.

Therefore, we are now publishing a three-year strategic plan to publicly explain the key work of the Securities and Futures Commission in market regulation and how we aim to enhance market competitiveness to consolidate Hong Kong's position as an international financial center. We will outline in the annual report the deployment and completed work of the Securities and Futures Commission in the relevant fiscal years to implement the strategic plan.

Over the next three years, the Securities and Futures Commission's four major strategic focuses are:

We are confident that the above four key works will strengthen the core advantages of Hong Kong's capital market, promote sustainable market development, and enhance competitiveness.

Maintaining Market Resilience and Mitigating Severe Damage to the Market

To maintain Hong Kong's position as an international financial center and risk management hub, the Securities and Futures Commission is committed to continuously enhancing the resilience of Hong Kong's financial market and its infrastructure. This will stabilize the foundation of the market and promote sustainable and safe market development.

Market Resilience

In the face of the challenging global market environment, tense geopolitical situations, and cybersecurity and technological risks, maintaining the resilience of the financial system.

Addressing emerging risks, enhancing the risk management capabilities of market infrastructure and intermediaries to lay a solid foundation for the sustainable development of the market.

Effective Investigation and Enforcement

Using technology to enhance the effectiveness of investigation and enforcement.

Fully leveraging our supervisory capabilities to detect market misconduct by listed companies and intermediaries.

Exploring new regulatory tools to supervise and investigate businesses spanning multiple jurisdictions.

Enhanced Cooperation

Continuing to closely cooperate with regulatory authorities in Hong Kong, the Mainland, and overseas to combat cross-border market misconduct and timely safeguard the rights and interests of investors.

Vigilance and Public Education

Allocating more resources to various promotional activities to ensure the delivery of concise, clear, and effective messages to the public.

Cooperating with the Hong Kong Police Force and the Investor Education and Financial Literacy Committee to combat investment scams and enhance public education.

Enhancing the Global Competitiveness and Attractiveness of Hong Kong's Capital Market

The global or local macroeconomic and political environment has undergone earth-shaking changes. Hong Kong needs to maintain competitiveness in various aspects, especially to uphold its position as an international asset and wealth management hub and a global fundraising center, fully leveraging its strengths to support the development of the local and Mainland markets.

By expanding and improving market connectivity mechanisms, deepening connections with the Mainland capital market. Introducing more Mainland-related derivative products to enhance Hong Kong's competitiveness in risk management. Strengthening the business footprint of Mainland enterprises in Hong Kong and expanding their business activities in Hong Kong.

Expanding overseas networks to broaden the base of issuers and investors in Hong Kong. Exploring potential cooperation opportunities with overseas regulatory authorities or the possibility of market connectivity. Actively participating in the formulation of international standards and taking a leading role in the International Organization of Securities Commissions to continue consolidating Hong Kong's international status.

Reviewing Hong Kong's positioning to enhance its ability in initial public offerings fundraising while improving market quality and liquidity. Implementing the medium- to long-term measures recommended by the Task Force on Enhancing Stock Market Liquidity.

Leading the Transformation of the Financial Market with Technology and ESG

In terms of technology, embracing financial innovation while maintaining market integrity and stability: Providing regulatory guidance on new virtual asset activities, promoting the development of regulatory systems for virtual asset trading platforms; safeguarding investor interests while supporting the tokenization of traditional products; using blockchain and Web3 basic technology to promote the establishment of a responsible and secure financial technology ecosystem; and establishing closer ties with local and international law enforcement agencies to combat crimes.

In terms of ESG, consolidating Hong Kong's position as a leading sustainable financial hub: Pragmatically leading the formulation of sustainable disclosure standards for enterprises in Hong Kong and the Asia-Pacific region; taking a leading role in bridging the gap between emerging markets and developed economies in the region and globally; connecting the Mainland carbon market with international investors to drive growth; expanding local ESG products and markets, jointly constructing a robust and comprehensive ESG ecosystem; curbing greenwashing; nurturing talent for sustainable finance; and reducing our carbon footprint according to the Securities and Futures Commission's carbon neutrality roadmap.

Enhancing Institutional Resilience and Operational Efficiency

The Securities and Futures Commission is a key infrastructure of Hong Kong's financial market. We will strive to enhance institutional resilience and operational efficiency, ensuring that our financial resources are sufficient to support daily operations through strict budgeting and internal monitoring measures.

As a world-class regulatory authority, the Securities and Futures Commission is committed to integrating talent, functions, and technology to enhance governance effectiveness, keeping pace with the development of the market and regulatory environment.

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