Author of the article: Meta Era guest author「0x ShinChan」
As a global financial hub, Hong Kong is attracting investors from all over the world. Against this background, issuing and trading virtual assets through the Hong Kong platform means that it can have closer contact with the international market, thereby obtaining more market-oriented asset pricing.
It has been one year since the Hong Kong Financial Services and the Treasury Bureau issued the Policy Declaration on the Development of Virtual Assets in Hong Kong. During this year, the evolution of Hong Kongs virtual asset policies has appeared to be particularly solid and strategic.This year witnessed the birth of many key policies and events. These processes have demonstrated Hong Kongs determination to promote the development of the Web 3.0 industry and find a balance between regulation, investor protection and innovation.Based on this, this article will sort out the important events of this year and review how Hong Kong led Asian Web 3.0 institutions and projects to the world.
Hong Kong clarifies policy stance on virtual assets
In October 2022, the Financial Services and the Treasury Bureau of Hong Kong issued the Policy Declaration on the Development of Virtual Assets in Hong Kong, which clearly explained its development perspective and strategy for the virtual asset industry and its related technologies and ecology. Hong Kong aims to build a stable development environment for the industry through innovation-oriented policies, comprehensive regulatory structures and risk-oriented strategies, and has currently launched multiple pilot projects to promote the application of relevant technologies.
Although the government has repeatedly expressed its support for the advancement of financial technology and virtual assets in the past, there are still voices in the local and international fields pointing out that Hong Kongs attitude towards the virtual asset industry still lacks clarity. In fact, Hong Kong has always maintained an open and inclusive strategy towards global virtual asset business innovators. This statement undoubtedly injects new vitality into the virtual asset industry, provides a complete and transparent regulatory structure, aims to build trust in the market, and points out the direction for its future sustainable development.
The Declaration disclosed that the Hong Kong Monetary Authority has started the preliminary work of the digital Hong Kong dollar and is cooperating with relevant mainland departments to expand the scope of the digital renminbi as a cross-border payment tool in Hong Kong. This further proves Hong Kong’s openness and integration strategy for global virtual asset business innovators.
Hong Kong Financial Secretary Paul Chan Mo-po emphasized in an article in November 2022 that the Securities and Futures Commission is open to innovation and technology, and at the same time resolutely safeguards the interests of investors. He pointed out that when observing the technological progress and application changes of virtual assets, the China Securities Regulatory Commission has never relaxed its supervision. Based on the principle of same business, same risks, same rules.
Hong Kong takes the lead in becoming the leader in Asia’s virtual currency futures ETF
Since then, Hong Kongs Web 3.0 ecosystem has begun to develop rapidly. On December 16 last year, Hong Kong Exchanges and Clearing Limited (HKEX) successfully introduced Asia’s first crypto-asset ETF, further enriching its product portfolio and meeting the diverse needs of Hong Kong and international investors.
The two ETF products launched this time are both issued by CSOP Asset Management Co., Ltd. They mainly track the Bitcoin and Ethereum futures prices of the Chicago Mercantile Exchange (CME). This step not only makes Hong Kong the first market in the world to launch an Ethereum futures ETF, but also establishes its leadership position as the first in Asia to offer a Bitcoin futures ETF.
Digital Hong Kong dollar exploration: HKMA launches strategic pilot trial
On May 18 this year, the Hong Kong Monetary Authority announced the strategic exploration plan for the Digital Hong Kong Dollar. This plan brings together 16 leading companies in the fields of finance, payment and technology, aiming to conduct pilot trials within this year, focusing on the application of Digital Hong Kong Dollar in omni-channel payment, intelligent transactions, offline payments, asset tokenization, and Web 3.0 transactions. Potential applications in six major areas including settlement and tokenized asset clearing.
Picture shows the Chief Executive of the Hong Kong Monetary Authority, Mr Eddie Yue, delivering the opening speech at the event and launching the Digital Hong Kong Dollar pilot project.
The Hong Kong Monetary Authority adopts a three-track strategy and actively studies the possibility of the digital Hong Kong dollar as a retail-level central bank digital currency. Against this background, the HKMA seeks to deepen cooperation with key players and conduct multiple rounds of trials with the aim of clarifying the specific application and operational procedures of the digital Hong Kong dollar. This feedback-driven approach to experimentation allows the HKMA to refine and refine its digital currency implementation strategy.
The advancement of the digital Hong Kong dollar not only involves technical and application challenges, but is also closely related to public acceptance and privacy considerations. From a regulatory and tax perspective, the digital Hong Kong dollar has learned from the experience of the digital renminbi, and its application scenarios will be richer and more diverse. It is expected to become a bridge between legal currency and virtual assets, especially in asset tokenization and international cross-border payments. field, saving users handling fees and intermediate costs.
Hong Kong financial regulatory innovation: HashKey and OSL become the first licensed virtual asset trading platforms for retail users
Starting from June 1, 2023, the Hong Kong Monetary Authority began to implement the new Virtual Asset Service Provider Licensing System (VASP). Compared with the earlier Type 1 (securities trading) and Type 7 (provision of automated trading services) regulated activity licenses, the new system not only opens up retail trading, but also adds strict access requirements, such as in Hong Kong. Establishment of physical offices, qualification requirements for senior management, and previous transaction volume and user count standards. Exchanges such as Binance, Bybit and OKX will receive a one-year grace period from Hong Kong supervision until May 31, 2024.
On August 3, the two major trading platforms HashKey and OSL announced that they had successfully upgraded from License No. 1 and No. 7 to the new VASP system. They officially became licensed trading platforms for Hong Kong retail users. The HashKey platform has further cooperated with Standard Chartered Bank, ZA BANK, etc. to provide users with legal currency deposit and withdrawal services.
This move is seen within the industry as a positive signal for the virtual asset market, especially considering that traditional financial institutions have long been conservative in this market. Hong Kong’s financial regulatory authorities are increasingly trusting and bringing virtual asset transactions within their regulatory scope, which is crucial to the future development of the entire industry. As the first crypto-asset trading platforms to be regulated in Hong Kong, HashKey and OSL can serve as a model for the entire industry.
JPEX cryptocurrency crisis: Hong Kong’s large-scale online financial fraud case
On September 13, 2023, the China Securities Regulatory Commission warned JPEX and its promoters of suspicious operations. JPEX subsequently increased the withdrawal fees and limited the withdrawal amount, causing the actual withdrawal amount of users to be significantly offset. Subsequently, the Hong Kong Monetary Authority and the Securities and Futures Commission expressed their stance on this and stated that JPEX may be involved in fraud. Since then, Hong Kong police have arrested a number of suspects related to this and conducted related searches. Chief Executive Li Jiachao also stated that the matter was suspected of fraud.
During this period, the China Securities Regulatory Commission issued multiple warnings, but JPEX did not respond positively; the police also stated that JPEX’s virtual currency JPC was actually worthless. At the same time, there is controversy within the Hong Kong Legislative Council over the regulatory strength of the Securities and Futures Commission in this incident. The Securities and Futures Commission responded that the previous regulatory mechanism limited its room for action.
On September 29, the Hong Kong police held a press conference to explain the details of the JPEX case and stated that the police would work through the international police cooperation mechanism to bring those involved in the case who have left Hong Kong to justice.
The Hong Kong Securities and Futures Commission also announced a special list of suspicious virtual asset trading platforms on September 29. There are currently 6 platforms on the list to help investors more easily identify suspicious virtual asset trading platforms operating in Hong Kong, and Raise awareness.
Since then, official agencies such as the Hong Kong Treasury Bureau, the Hong Kong Security Bureau, and the Hong Kong Investment Committee have expressed their stance to jointly promote the follow-up and conclusion of the incident, and perform their respective duties to improve and implement relevant norms and a series of rectification measures.
