Hong Kong is about to tighten its crypto regulations, wanting to take things up a notch in the next 18 months. This is part of a bigger plan to solidify the city as a global financial tech hub.
The goal is reportedly to create a secure, well-regulated environment that doesn’t just protect investors but also attracts serious crypto players.
David Chiu, a member of Hong Kong’s Legislative Council, laid it all out for us at the Foresight 2024 summit.
According to him, the city wants to pull in tech talent, build out new infrastructure, and, most importantly, hammer out some serious legislative oversight for the crypto industry.
A new framework on the horizon
Chiu acknowledged that while the industry has grown, it’s still early days. In his words:
“We’re still in the early stages. But we need to establish a sound exchange system and get legislation in place for stablecoins soon.”
And by soon, he means before the end of this year. Stablecoins are set to become a regulated thing in Hong Kong, with rules expected to drop before 2025 hits.
The government is already testing the waters. Sandbox tests are underway, and Chiu made it clear that the next year and a half will be important. The focus? Tightening supervision and making sure the new laws actually have some teeth.
He told us that the government would push project teams to experiment with new financial products in the city.
Licensing, stablecoins, and more
Hong Kong’s already got a few things in place, like its licensing regime for Virtual Asset Service Providers (VASPs).
The Securities and Futures Commission (SFC) is the one handing out these licenses, which are required for managing crypto assets. Exactly a year ago, the SFC had given out 11 Type 9 licenses and at least one hybrid license.
These licenses come with a catch—firms have to meet strict operational and risk management standards. The goal was to boost investor confidence and keep the market from going off the rails.
On the stablecoin front, the Hong Kong Monetary Authority (HKMA) is set to roll out a mandatory licensing regime in 2024/25. Stablecoin issuers will need to meet tough standards around capital, liquidity, and risk management.
The HKMA wants to minimize their risks to the financial system. And then there’s tokenization. The SFC has already sent out circulars to clear up how tokenized securities fit into the bigger picture.
They’ve made it clear that these are a subset of digital securities, and there are strict rules intermediaries need to follow.
We’re talking about risk management, proper disclosures, and thorough due diligence to protect investors. The SFC is even considering allowing the tokenization of retail investment products.
