Source: Zijing News
Written by: Wang Huijuan
In the process of accelerating global digital economy development, Hong Kong is seizing the opportunity for digital asset development with a clear strategic layout. On June 26, the Hong Kong Special Administrative Region (SAR) government published the "Hong Kong Digital Asset Development Policy Declaration 2.0" ("Policy Declaration 2.0"), reaffirming its vision to establish Hong Kong as a global innovation center in the digital asset field. Recently, the Financial Secretary of the Hong Kong SAR government, Paul Chan, accepted a written interview with this publication, systematically elaborating on the core essence of the "Policy Declaration 2.0," detailing Hong Kong's practical paths in digital asset regulation, stablecoin development, tokenization applications, and ecosystem construction, demonstrating a firm determination to promote Hong Kong as a global innovation center in the digital asset field.
Paul Chan
Policy Iteration from "Framework Building" to "Ecosystem Deepening"
"Our goal is to prudently advance the development of the digital asset industry. We hope to establish a responsible, sustainable, and deeply integrated digital asset ecosystem in Hong Kong," said Paul Chan. The first policy declaration published in October 2022 indicated the SAR government's open and inclusive attitude towards the development of the digital asset industry. At the same time, the SAR government intends to work with financial regulatory agencies to create a more convenient environment to promote the sustainable and responsible development of Hong Kong's digital asset industry. Chan pointed out, "As an international financial center and innovation technology hub, Hong Kong is striving to embrace the major trend of digital asset development, actively leading and promoting relevant innovative explorations and developments while balancing 'appropriate regulation' and 'promoting development.' Since the first declaration was published over two years ago, Hong Kong has made considerable progress in regulatory frameworks and practical explorations."
Starting from June 2023, the SAR government implemented a licensing system for digital asset trading platforms, with 11 platforms already licensed and another 9 applications currently being processed; the SAR government has issued tokenized green bonds totaling approximately HKD 6.8 billion twice, proactively demonstrating the benefits of tokenization and empirically proving the application value of blockchain technology in the financial sector; the "Stablecoin Ordinance," which took effect on August 1 this year, marks a key step in the regulation of new financial instruments in Hong Kong.
Digital assets are a highly transformative track in the fintech field, and Hong Kong is seizing this opportunity with an open yet prudent attitude. The core of the first policy declaration in 2022 was "breaking the ground," clarifying regulatory orientation and initiating pilot programs to lay the foundation for industry development; while the key of "Policy Declaration 2.0" is "deepening," promoting Hong Kong's upgrade from a digital asset "testing ground" to a global digital asset innovation hub through the "LEAP" framework.
The "LEAP" framework proposed in "Policy Declaration 2.0" is a systematic plan by Paul Chan's team for the development path of digital assets in Hong Kong. Chan stated, "The declaration indicates the SAR government's commitment to making Hong Kong a global innovation center in the digital asset field, and it also marks Hong Kong's move towards forming a trustworthy, sustainable, and deeply integrated digital asset ecosystem with the real economy." He interpreted, "L" (i.e., Legal and regulatory streamlining) focuses on building a comprehensive regulatory system, "We are constructing a complete regulatory framework for digital asset service providers. The current focus is on establishing a licensing system for digital asset trading and custody service providers. We are conducting public consultations on relevant legislative proposals with the Securities and Futures Commission (SFC) to finalize the details of the legislative proposals as soon as possible." "E" (i.e., Expanding the suite of tokenized products) aims to enrich application scenarios, including regularizing the issuance of tokenized government bonds and providing policy incentives for the tokenization of real assets such as gold and renewable energy, "We are preparing to issue a third batch of tokenized bonds and will regularize the issuance of tokenized government bonds. At the same time, we are providing incentives for the tokenization of real-world assets, such as clarifying the exemption of stamp duty on the transfer of tokenized exchange-traded funds (ETFs)." "A" (i.e., Advancing use cases and cross-sectoral collaboration) focuses on exploring the application of stablecoins in cross-border payments, supply chain management, and other fields, "Stablecoins provide a cost-effective alternative outside the traditional financial system. We encourage the market to propose suggestions on how to experiment with and use licensed stablecoins, such as enhancing the efficiency of cross-border payments." Chan also mentioned that alongside the release of "Policy Declaration 2.0," Cyberport launched the "Blockchain and Digital Asset Pilot Funding Scheme," providing up to HKD 500,000 in funding for local strong blockchain and Web 3.0 application projects to drive innovative application practices and promote sustainable industry development. "P" (i.e., People and partnership development) focuses on cultivating professional talent and deepening international regulatory collaboration, "We will collaborate with the industry and academia to promote talent training and development, positioning Hong Kong as an excellent center for digital asset knowledge sharing, and facilitating cooperation with other jurisdictions, including joint research programs and cross-border regulatory collaboration, while continuously expanding the talent pool."
The introduction of the "LEAP" framework strongly promotes the formation of a trustworthy, sustainable, and deeply integrated digital asset ecosystem in Hong Kong. "Policy Declaration 2.0" also covers a broader range of specific policy directions and measures. From departmental regulation to inter-agency collaboration, from pilot exploration to ecosystem construction, Hong Kong's digital asset policy is achieving a qualitative leap. The iteration of digital asset policies reflects a profound understanding of market rules. It is necessary to prevent risks through clear rules while leaving enough space for innovation, attracting high-quality global projects to settle in Hong Kong while safeguarding the rights and interests of investors and the public.
Paul Chan stated that digital assets are an important and highly promising part of fintech. Through blockchain technology, they enable more efficient and lower-cost financial transactions, making financial services more inclusive. "Policy Declaration 2.0" demonstrates our vision for the development of digital assets and showcases the practical applications of tokenization, promoting the diversification of application scenarios. By combining prudent regulation with encouraging market innovation, we aim to build a more vibrant digital asset ecosystem that integrates with the real economy and social life, bringing benefits to the economy and society while further consolidating Hong Kong's leading position as an international financial center," Chan said.
Balancing "Safety" and "Innovation" in Stablecoin Regulation
Stablecoins serve as a bridge between traditional finance and digital finance, and their regulation must consider both risk prevention and functional performance. Paul Chan pointed out, "Stablecoins are relatively new financial instruments that possess attributes of traditional financial tools while also having their unique characteristics. As a payment tool, stablecoins connect traditional finance with digital assets, facilitating cross-border use. However, the anonymity of stablecoin usage can pose regulatory risks, including challenges related to anti-money laundering."
The global stablecoin market has reached a scale of USD 240 billion, with transaction volumes exceeding USD 20 trillion in 2024, and their applications in payment settlements and capital market activities are becoming increasingly widespread. In the future, stablecoins will be used more broadly, and how to properly manage various inherent and spillover risks is gradually becoming a focus for international regulatory agencies.
"Considering the risks associated with the issuer's business, user protection, and the market's capacity and long-term development, the government has set a relatively high threshold for licensing, planning to issue only a few licenses in the initial stage," Chan emphasized. Clearly, this "rigorous" strategy is not a limitation on development but rather aims to cultivate "responsible innovation." "Licensed stablecoin issuers must have sustainable business plans, the relevant stablecoins must have practical application scenarios, operate their businesses in a robust and sustainable manner, and must gain the trust of market participants, ensuring that their stablecoins have a certain level of acceptance," Chan stated. "From a compliance perspective, stablecoin issuers must possess adequate support, key capabilities, and experience in various areas, such as reserve asset management and asset security, effective price stabilization mechanisms, comprehensive and feasible redemption policies, as well as capabilities in technology security, risk management, and anti-money laundering."
The "cross-border" and "innovative" nature of stablecoins presents dual challenges for regulation. Paul Chan and his team are committed to reasonably addressing this issue. Chan emphasized, "The application scenarios of stablecoins involve other regions, and license applicants must have comprehensive compliance plans and sufficient resources to ensure that both they and their business partners hold the necessary licenses, and that they comply with relevant regulations in Hong Kong and other regions when engaging in stablecoin-related activities." On one hand, due to their applications potentially involving multiple jurisdictions, an international collaboration mechanism needs to be established; on the other hand, since the speed of technological iteration exceeds that of regulatory updates, regulatory flexibility must be maintained. Regarding market development, license applicants must demonstrate a concrete and feasible business plan and possess sufficient technical and financial resources to support operations, ensuring that their businesses can operate sustainably and robustly. Specifically, applicants need to propose how stablecoins can effectively address pain points in economic and financial activities, and licensed issuers must prove that their stablecoins can genuinely resolve economic activity pain points, such as shortening settlement times in cross-border trade and improving capital turnover efficiency in supply chain finance. They must also explain how to maintain sufficient usage and have adequate resources for continuous operational development. Chan revealed that after the ordinance takes effect, the Monetary Authority will promptly initiate the licensing approval process while encouraging the market to explore scenario innovations under compliance, allowing stablecoins to truly serve the real economy.
Additionally, the SFC released a newly formulated "ASPIRe" roadmap on February 19 this year, outlining 12 key measures under five major pillars to enhance innovation, growth, and security in Hong Kong's digital asset market. The five pillars of the "ASPIRe" roadmap are Access, Safeguards, Products, Infrastructure, and Relationships. These measures will facilitate connections with global liquidity, achieve security-based adaptive compliance and product frameworks, and promote the upgrading of traditional financial services using blockchain technology for infrastructure. Based on the "ASPIRe" roadmap, the SFC has issued regulatory guidelines regarding the provision of staking services to licensed virtual asset trading platforms on April 7 this year, as well as guidelines for SFC-recognized funds investing in digital assets to participate in staking activities.
As major countries and regions around the world gradually establish regulatory systems related to stablecoins, Hong Kong will continue to cooperate with the international community to jointly promote financial stability and innovation. Hong Kong's response strategy is "dynamic adaptation," maintaining a risk baseline while regularly assessing and adjusting regulatory details to ensure that rules do not lag behind innovation or condone risk spillover.
After the "Stablecoin Ordinance" takes effect, the Monetary Authority will promptly initiate the licensing approval process
The Tokenization Wave from "Financial Instruments" to "Omni-Domain Penetration"
Tokenization is not merely about "putting assets on the blockchain," but rather a revolution in the efficiency of traditional economic activities. The SAR government has clearly stated its intention to "regularize" the issuance of tokenized bonds, and is currently preparing for the third batch of issuance, expecting to establish a "regular and scaled" issuance mechanism in the future, providing standardized samples of tokenized financial products to the market. At the same time, the SAR government is lowering the barriers for the tokenization of real assets through policy innovation. For example, the transfer of tokenized exchange-traded funds (ETFs) can be exempt from stamp duty, which will significantly enhance product liquidity and attract more institutional participation.
The potential of tokenization extends far beyond finance. In the precious metals sector, the tokenization of gold and non-ferrous metals can lower investment thresholds, allowing small and medium investors to conveniently participate in the commodity market; in the green economy sector, the tokenization of renewable energy assets such as solar panels can attract social capital into environmental projects, aiding the achievement of "dual carbon" goals. Paul Chan reiterated that the "Blockchain and Digital Asset Pilot Funding Scheme," launched simultaneously by Cyberport, has provided up to HKD 500,000 in funding for related projects. Several cross-sector application projects are currently in the advancement stage.
The core value of tokenization is "enhancing efficiency and reducing costs." Taking tokenized bonds as an example, their settlement time has been shortened from the traditional T+2 to a matter of minutes, significantly reducing issuance costs; if promoted to supply chain finance in the future, it could achieve "settlement upon transfer of goods rights" through smart contracts, addressing the pain points of financing difficulties and long payment terms for small and medium enterprises. These practices are not about technological "showboating," but are genuinely aimed at reducing costs and increasing efficiency in economic activities, which is the significance of digital asset development.
Ecosystem Construction: "Talent + Collaboration" Strengthens Development Foundation
The competition in digital assets is essentially a competition for talent and industry ecosystems. Paul Chan places great emphasis on "talent and partnership development" when discussing the "LEAP" framework, and plans to collaborate with academia to cultivate a new generation of technical experts. To achieve the goal of developing Hong Kong into a knowledge hub for digital assets, it is essential to build a talent ecosystem characterized by "nurturing talent and seamless collaboration," forming a sustainable talent pool that cultivates local strength while gathering global resources.
Currently, the government, universities, and industry have launched relevant talent training programs for digital assets. "Policy Declaration 2.0" clearly positions Hong Kong as a "center for digital asset knowledge sharing and international cooperation," proposing to promote joint research, regulatory dialogue, and global talent exchange. The University of Hong Kong School of Professional and Continuing Education (HKU SPACE) has launched a "Certificate (Unit: Cryptocurrency Investment Decoding)" course, covering blockchain technology, cryptocurrency trading, DeFi applications, and more, which is included in the scope of the Continuing Education Fund. The Hong Kong Securities and Investment Institute (HKSI) launched the "Certified Virtual Asset Professional (CVAP)" course in March this year, designed in collaboration with the SFC to provide training for finance practitioners. Cyberport has also launched the "Blockchain and Digital Asset Pilot Funding Scheme" this year to support the technological implementation of startups.
In terms of international collaboration, Hong Kong's unique advantage lies in its "dual market connectivity" under the "One Country, Two Systems" principle, deeply integrating into the national opening-up strategy while seamlessly connecting with international market rules. Currently, Hong Kong is exploring collaborative development paths between "offshore digital assets and onshore financial markets" with the mainland, such as studying the application of offshore RMB stablecoins in cross-border trade, complementing the digital RMB pilot; at the same time, it is establishing a "regulatory sandbox interconnection" mechanism with regulatory agencies in Singapore, the UK, and others, allowing innovative projects to be tested across multiple jurisdictions.
Hong Kong's goal is not to "go it alone," but to provide a "Hong Kong solution" for global digital asset development. The implementation of "Policy Declaration 2.0" will promote Hong Kong in building a digital asset ecosystem that is "responsible, sustainable, and deeply integrated with the real economy." In the next 3-5 years, Hong Kong is expected to become a core hub for global tokenized asset trading, a testing ground for innovative applications of stablecoins, and a gathering place for digital asset talent, making "Hong Kong Digital Assets" another global calling card following "Hong Kong Finance."
Currently, under "One Country, Two Systems," Hong Kong serves as a "firewall" and "testing ground," adhering to the principle of "same business, same risk, same rules," taking a prudent approach to promote the sustainable development of the digital asset industry. The development of the digital asset market is rapidly changing, and Hong Kong will continue to closely monitor relevant trends, basing its actions on risk prevention while continuously optimizing and establishing a regulatory system that is both suitable for local conditions and follows international standards and practices, promoting the healthy, responsible, and sustainable development of Hong Kong's digital asset market.
From the meticulous refinement of the regulatory framework to the continuous expansion of application scenarios, from the careful cultivation of local talent to the broad gathering of international resources, Paul Chan and his team are steadily and resolutely pushing Hong Kong to accelerate its pace in the digital asset arena. Chan candidly stated, "As an international financial center, we firmly believe that Hong Kong's path to advancing the digital asset industry can provide experience and reference for the development of the global digital asset market." This dual exploration of finance and technology, driven by policy innovation, not only concerns the future of Hong Kong's financial market but will also contribute unique "Hong Kong wisdom" to the development of the global digital economy.
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