What's in Hong Kong's Digital Assets Development Policy Declaration 2.0?
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What's in Hong Kong's Digital Assets Development Policy Declaration 2.0?
Hong Kong Digital Asset Development Policy Declaration 2.0 Released: Comprehensive Strategy on Regulation, Tokenization, Use Cases (including Stablecoins), and Talent Development.
Navigating Web3 tides with focused insightsCompiled by KarenZ, Foresight News
On June 26, the Hong Kong Special Administrative Region government released the "Hong Kong Policy Statement on Digital Assets Development 2.0" (the "Policy Statement 2.0"), committing to enhancing liquidity in digital asset trading, promoting a more diversified range of digital asset products, empowering industry development, advancing inclusive finance, and cultivating talent—ultimately reinforcing Hong Kong’s position as a global digital asset hub.
The Policy Statement 2.0 marks the next phase of development following the Securities and Futures Commission’s (SFC) release of the "ASPIRe" roadmap earlier this year. The ASPIRe roadmap introduced a new regulatory framework for over-the-counter virtual asset trading and virtual asset custody services, and aims to expand virtual asset products and services.
TL;DR
1. Introduces the "LEAP" framework, comprising four pillars: streamlining legal and regulatory frameworks, expanding the suite of tokenised products, advancing use cases and cross-sector collaboration (including stablecoins), and developing talent and partnerships.
2. The Financial Services and the Treasury Bureau (FSTB) and the SFC will soon launch public consultations on licensing regimes for digital asset trading service providers and digital asset custodians.
3. The SFC will serve as the primary regulator for digital asset trading and custody service providers, responsible for licensing and registration, setting standards, and improving regulatory processes.
4. The Hong Kong Monetary Authority (HKMA), as the frontline regulator for banks, will supervise their digital asset trading and custody activities.
5. The Hong Kong government plans to regularise the issuance of tokenised government bonds and promote tokenisation across various sectors including precious metals (e.g., gold), non-ferrous metals, and renewable energy.
6. The stamp duty exemption currently applicable to the transfer of all ETFs listed on the Hong Kong Stock Exchange will also apply to tokenised ETFs.
7. Hong Kong will implement a regulatory regime for stablecoin issuers starting August 1, 2025. Market participants are encouraged to propose ways the government could pilot and utilise licensed stablecoins.
8. Cyberport will assist the government in building a robust pipeline of professional talent.
Key Highlights from the Policy Statement 2.0:
The policy introduces the “LEAP” framework, aiming to build a trusted, sustainable, and deeply integrated digital asset ecosystem within the real economy. The framework includes:
1. Streamlining Legal and Regulatory Frameworks (Legal and regulatory streamlining)
1. Unified and Comprehensive Regulatory Framework: Covers digital asset exchanges, stablecoin issuers, digital asset trading service providers, and custodians, with investor and consumer protection at its core.
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The next major step is to conduct public consultation on licensing mechanisms for digital asset trading service providers and digital asset custodians.
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The HKSAR government proposes designating the SFC as the primary regulator for digital asset trading and custody service providers, responsible for licensing and registration, standard-setting, and streamlining regulatory procedures.
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The HKMA, as the frontline banking regulator, will oversee banks’ digital asset trading and custody activities.
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Hong Kong will continue to adopt international standards related to digital assets, including the International Organization of Securities Commissions (IOSCO)’s “Policy Recommendations for Crypto and Digital Asset Markets,” the Financial Stability Board’s (FSB) “Regulatory Framework for Global Crypto-Asset Activities,” the Basel Committee on Banking Supervision’s “Prudential Treatment of Crypto-asset Exposures,” and the Organisation for Economic Co-operation and Development’s (OECD) “Crypto-Asset Reporting Framework” aimed at enhancing tax transparency.
2. Review of Tokenisation Laws and Regulations: The FSTB and HKMA will lead a review of relevant legal and regulatory frameworks, drawing on international experience to facilitate broader adoption of tokenisation in Hong Kong. Initial focus will be on the bond market, where proof-of-concept projects have already been completed. A comprehensive review of the issuance and trading processes for tokenised bonds—including settlement, registration, and record-keeping requirements—will be conducted.
2. Expanding the Suite of Tokenised Products
1. Regularising Tokenised Government Bond Issuance: The government has already issued tokenised green bonds totaling approximately HK$6.8 billion in two tranches. Going forward, it will regularise the issuance of tokenised government bonds.
2. Promoting Tokenisation of Real-World and Financial Assets:
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Through the HKMA’s Ensemble project, innovative use cases will be encouraged, including tokenisation of traditional financial products (such as money market funds and other funds) and cash flows from real-world assets. The HKMA is exploring the establishment of the Ensemble infrastructure to facilitate interbank settlement of tokenised deposits, streamlining processes and enhancing liquidity.
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The London Metal Exchange (LME) has included Hong Kong as an approved delivery location in its global warehouse network. The government encourages market players to apply tokenisation and physical asset tracking technologies within warehousing initiatives.
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The government will intensify efforts to expand tokenisation solutions into sectors such as precious metals (e.g., gold), non-ferrous metals, and renewable energy (e.g., solar panels).
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It is clarified that the current stamp duty exemption for transfers of all ETFs listed on the Hong Kong Stock Exchange will equally apply to tokenised ETFs.
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The government will submit legislative proposals to include specified digital assets among qualifying transactions eligible for profits tax exemption under private placement funds and family investment holding vehicles. If approved by the Legislative Council, the tax exemption will take effect from the 2025/2026 tax year.
3. Advancing Use Cases and Cross-Sector Collaboration
1. Supporting Stablecoins and Other Tokenisation Projects, Including Exploring Stablecoins as Payment Tools: Hong Kong will implement a regulatory regime for stablecoin issuers starting August 1, 2025. The regime will set requirements for reserve asset management, stability mechanisms, redemption processes, and prudent risk management, enabling licensed stablecoin issuers in Hong Kong to explore and deploy solutions across various applications. Market participants are welcome to propose how the government could pilot and utilise licensed stablecoins.
2. Enhancing Collaboration Among Regulators, Law Enforcement, and Technology Providers: Cyberport will collaborate with stakeholders across the digital asset industry, leveraging its incubation ecosystem to provide support including business matchmaking, technical assistance, expert mentorship, and participation in accelerators focused on digital assets and Web3. Cyberport will also launch a Blockchain and Digital Assets Pilot Funding Scheme, offering funding and support to projects with future application potential, landmark significance, and market impact.
3. The Investment Promotion Agency stands ready to support digital asset service providers in establishing and expanding their operations in Hong Kong.
4. Hong Kong Exchanges and Clearing Limited (HKEX) has launched Hong Kong’s first digital asset indices, providing investors with transparent and reliable price benchmarks for Bitcoin and Ethereum within the Asian time zone.
5. Encouraging the Development of Digital Asset Infrastructure, including regtech, cybersecurity, and monitoring solutions with local expertise and deep regional knowledge. The government will promote collaboration among technology providers, regulators, and law enforcement agencies.
4. Talent and Partnership Development
1. Continued support for training and talent development in the digital asset sector, particularly in blockchain applications, AI integration, and digital asset innovation. Cyberport will assist the government in building a stable pipeline of professional talent through targeted initiatives.
2. The government will promote strategic collaborations between universities and industry to bridge academic research with practical applications in digital assets. Joint research programs will focus on developing new blockchain applications, tokenisation frameworks, surveillance tools, and AI-driven financial instruments.
3. The government will strengthen cooperation among regulators and law enforcement agencies, coordinate efforts among local authorities, and support the development of a transparent, secure, and resilient digital asset market. It will also work with regulators to participate in international cooperation initiatives.
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