The Hong Kong government issued a policy statement on the local development of virtual assets at the opening of the city’s flagship tech conference Hong Kong FinTech Week on October 31, aiming to promote the city as an international crypto hub.
Hong Kong is “ready to engage” with global virtual asset (VA) service providers and invite them to the city, the statement says. The regulators are exploring a number of pilot projects to test the technological benefits brought about by VAs and their further applications in financial markets. These projects include NFT issuance for this year’s Hong Kong FinTech Week, green bond tokenization, and e-HKD, an anchor bridging legal tender and VA.
The NFTs will serve as proof of attendance for attendees of the Hong Kong FinTech Week, offering them a digital badge and memento using blockchain technology in celebration of their participation.
Bond tokenization holds the potential to enhance efficiency and reduce costs of bond issuance and settlement, and could open the market to a broader investor base. The Hong Kong Monetary Authority is working on a pilot project tokenizing Government Green bond issuance for subscription by institutional investors. The objective is to test out the financial infrastructure and the legal and regulatory environment in Hong Kong for the use of distributed ledger technology (DLT) throughout the bond lifecycle.
A regulatory regime has been launched to license VA Exchanges using an “opt-in” approach, set to come into effect on March 1 next year. From the perspective of VA Exchanges, a licensing status will offer them the potential to open new distribution channels in Hong Kong, tapping into the city’s sizable asset and wealth management market, which is worth over $4.5 trillion.
Hong Kong’s Securities and Futures Commission will conduct a public consultation on how retail investors may be given a “suitable degree of access to virtual assets” to licensed exchanges, according to the policy statement.
The policy statement adds that Hong Kong is open to the possibility of having Exchange Traded Funds (ETFs) on virtual assets. The Securities and Futures Commission has been actively looking to set up a regime to authorise ETFs that provide exposure to mainstream virtual assets with appropriate investment guardrails.
Christopher Hui, Secretary for Financial Services and the Treasury, said, “We recognise the potential of DLT and Web3 to become the future of finance and commerce, and under proper regulation they are expected to enhance efficiency and transparency. The Hong Kong government is prepared to embrace this future, and we welcome the clustering of the fintech and VA community and talent in Hong Kong, and we will promote the sustainable development of financial services across the whole VA value chain.”
In recent years, Singapore has also made great efforts in the cryptocurrency field, attracting many enterprises to develop operations in the city-state. GIC Private Limited, Singapore’s sovereign wealth fund, has repeatedly invested in cryptocurrency companies, including Coinbase and BC Technologies. DBS, Singapore’s largest commercial bank, has set up a crypto asset exchange to allow institutional and professional investors to trade and use custodian services in cryptocurrencies, including Bitcoin.