- Hong Kong plans to introduce new stablecoin legislation to regulate its use and boost global trade.
- The city will extend regulations to cover OTC trading and custodial services for digital assets.
- Hong Kong aims to lead in Web3 innovation with a balanced regulatory framework.
The Hong Kong government aims to introduce a new and updated regulating policy for virtual assets by the end of 2025. This new framework is going to expand upon the city’s previous virtual asset regulations while focusing on bringing Web3 technologies into the realm of traditional finance. These plans were unveiled by the financial secretary, Paul Chan, at the Hong Kong Web3 Festival, with the belief that innovation should be supported as the market stability is sustained.
Expanding on Earlier Commitments
The forthcoming policy statement will provide more detailed information compared to the city’s first guideline for virtual assets, issued in October 2022. Chan highlighted that the strategy was to maintain the appropriate climate for innovations and sustainable market integrity at the same time. The updated framework seeks to increase the adoption of digital assets technology to enhance the real economy, which is seen as an indication of the city’s intention to embrace Web3 and blockchain technology.
The first policy on virtual assets in Hong Kong targeted the creation of a high-level regulatory framework. The Hong Kong SFC has established rules for virtual asset trading platforms with a licensing framework. Currently, only 10 trading platforms have received licenses, which shows that Hong Kong is actively engaged in regulating the industry and its development. The government has authorized the virtual asset spot exchange-traded funds (ETFs), which makes Hong Kong a leading VA ETF market, specifically in the Asia Pacific region.
Stablecoin Legislation and OTC Oversight
One of the main objectives of the new policy in Hong Kong is the regulation of stablecoins. Government authorities have plans to create legislation regarding stablecoins, which would increase their significance in cross-border commerce. Stablecoins are being regarded as credible financial instruments, and the update will seek to provide outlines on how to use them.
Furthermore, Hong Kong is reviewing its strategies concerning the OTC virtual asset trading and custody services. As part of this process, consultations are being made to bring these services under regulation by the concerned authorities. This move aims to establish even higher levels of security for the virtual asset market and its users.
Chan emphasized how the government is keen on regulation and is interested in bringing together the stakeholders. He believes that there needs to be a multi-stakeholder effort made with regulators, governments, and market participants from all areas to build Web3 responsibly. This is demonstrated by the Hong Kong Monetary Authority’s regulatory sandbox, Project Ensemble, which permits financial institutions to pilot tokenized real-world assets.
Hong Kong has a relatively open approach towards web3 compared to the other jurisdictions in the region. The government is also ensuring that the city becomes a hub for blockchain ecosystem and at the same time ensuring that fiscal conditions remain stable. This new framework will aim to promote sustainable growth within the digital asset market through level regulation.
