On October 31, on the launch of this 12 months’s FinTech Week in Hong Kong, the Monetary Providers and Treasury Bureau (“FSTB”) issued a coverage assertion outlining its imaginative and prescient for creating the digital belongings (“VA”) sector right here and outlined a number of new initiatives aimed toward “selling sustainable and accountable improvement of the sector”.
Earlier this 12 months (please click on right here), the Hong Kong authorities laid in depth groundwork for a VA regulatory regime which started with the SFC and HKMA collectively issuing a steerage round for all native intermediaries regarding the distribution of VA and provision of providers by digital asset service suppliers (“VASPs”) in Hong Kong. Then, in June, the federal government put ahead new laws for a compulsory licensing and regulatory regime for all VASPs in Hong Kong.
Beneath this new regime, which takes impact on 1 March 2023, VAs which fall inside Hong Kong’s statutory definition of securities or futures contracts can solely be traded on crypto exchanges operated by intermediaries which have been licensed by the SFC as VASPs. Intermediaries that distribute, cope with or advise on VAs additionally must be licensed and adjust to current SFC laws. And, in the interim, licensed VASPs are solely permitted to offer such providers to skilled traders.
The FTSB’s coverage assertion acknowledges the numerous potential of VAs and proposes a number of new initiatives that the Hong Kong authorities hopes will cement Hong Kong’s standing as a world cryptocurrency hub.
- Firstly, the SFC will conduct public consultations on modifications that might enable retail traders to commerce in VA, presumably through a brand new class of alternate traded funds. With out such modifications, retail traders will solely give you the option to take action through abroad exchanges past the regulatory oversight of Hong Kong regulators.
- Secondly, recognizing that Hong Kong’s hidebound authorized system doesn’t but recognise both good contracts or tokenised belongings, the Hong Kong authorities will undertake a assessment of current legal guidelines with a view to amending them so each of those may be correctly regulated. Sensible contracts are merely packages saved on a blockchain that function like an algorithm when predetermined situations are met. They’re seen as a doable alternative for typical contracts in particular business eventualities. Tokenised belongings are digital tokens created on a blockchain which may signify both digital or bodily belongings. They signify a brand new type of possession which may bolster each accessibility and liquidity of property possession.
- Thirdly, the HKMA will observe up its January 2022 dialogue paper on increasing the regulatory framework to cowl payment-related stablecoins (i.e. cryptocurrency the worth of which is pegged to fiat forex or another asset).
- Lastly, over the approaching months, the Hong Kong authorities plans to launch pilot tasks to discover proof-of-concept for doable introduction of tokenised ‘Inexperienced bonds’ that could possibly be issued by the Hong Kong authorities and an e-HKD akin to the Digital Yuan utilized in mainland China.
These are unquestionably bold proposals which will go a protracted method to placing Hong Kong forward of Singapore because the preeminent cryptocurrency centre of Asia. Within the meantime, intermediaries that provide regulated cryptocurrency providers have till 1 March 2023 to make all mandatory modifications to make sure they’re absolutely compliant when the brand new laws go into impact on.