Hong Kong wants to be the world’s home for virtual assets
The Capital of VA? Virtual assets have to live somewhere and HK thinks it has the regulation for it
Hong Kong is trying to push its vision of a local virtual asset (VA) industry in the hopes of developing a new revenue stream for the country.
The plan includes licensing regimes for asset providers, regulatory regimes for cryptocurrencies, pilot programs and the opening of retail investments.
“The government, in conjunction with the financial regulators, are working towards providing a facilitating environment for promoting sustainable and responsible development of the VA sector in Hong Kong,” it said in a policy statement.
“We will put in place timely and necessary guardrails to mitigate actual and potential risks in line with international standards, so that VA innovations can thrive in Hong Kong in a sustainable manner.”
The government said it was stepping up preparatory work for a new licensing regime for VA Service Providers and engaging with global VA Exchanges.
The Hong Kong Monetary Authority (HKMA) is also working on a regulatory regime for stablecoins, cryptocurrencies whose value is tied to a fiat currency.
Meanwhile, the Securities and Futures Commission plans to conduct public consultation on how retail investors can access virtual assets, possibly including exchange traded funds (ETFs), or blends of digital assets such as crypto and NFTs to create a pooled investment security. Currently only professional investors are allowed to invest in virtual assets.
Hong Kong government also said it was exploring NFT issuance, green bond tokenization and e-HKD pilot projects with regulators and is open to reviewing property rights for tokenized assets and the legality of smart contracts.
"We recognize the potential of distributed ledger technology (DLT) and Web 3.0 to become the future of finance and commerce, and under proper regulation they are expected to enhance efficiency and transparency,” said Secretary for Financial Services and the Treasury, Christopher Hui in a statement.
“The government is prepared to embrace this future, and we welcome the clustering of Fintech and VA community and talents in Hong Kong, and we will promote the sustainable development of financial services across the whole VA value chain," he added.
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The announcement was released at the start of Hong Kong’s FinTech Week. Hong Kong is about 1.5 times larger than the small island nation of Singapore, another business savvy city hosting its own FinTech Week at the same time.
Last week, the Monetary Authority of Singapore (MAS) proposed measures to protect consumers who engage in cryptocurrency trading, including stablecoins, a technology that hasn’t always been known to go so well. The $40 billion collapse of Singapore-headquartered Terra Lab’s "stablecoin" TerraUSD and similar Luna tokens set off what has been called a "crypto winter."
Singapore’s proposed regulations overall put more responsibility on the digital asset provider.
As for Hong Kong, it announced earlier this month it is on the hunt for more tech talent as it seeks to be a technology hub again. The elephant in the room is its continued limited independence from China under the “One Country, Two Systems” plan.
Singapore has seen an influx of individuals and businesses coming from Hong Kong this year, according to Steven Okun, senior advisor and China expert at international trade consultancy McLarty Associates. "The exodus from Hong Kong to Singapore is well underway," Okun said last February. He described Hong Kong as transitioning from a global hub to a Chinese city.
"This is not a western phenomenon," he added. "You are having Chinese businesses which need to have a global presence coming to Singapore, the same as western businesses." ®