Full text: Policy Declaration on Virtual Asset Development in Hong Kong
原文来源： 香港财政司（财经事务及库务局）
On October 31, the Financial Secretary of Hong Kong (Financial Services and the Treasury Bureau) officially issued the Policy Declaration on the Development of Virtual Assets in Hong Kong, which set out the government's policy stance and guidelines on the development of the booming virtual assets industry and ecosystem in Hong Kong.
The declaration said that while stepping up preparations for the licensing system for new virtual asset service providers, it was willing to contact the global virtual asset industry to invite relevant trading platforms to explore business opportunities in Hong Kong. The Securities and Futures Commission will launch a public consultation on the appropriate extent to which retail investors can trade in virtual assets under the new licensing regime. The government has welcomed the possibility of introducing a virtual asset trading platform (ETF) into Hong Kong. The Government is open to reviewing the legality of property rights and smart contracts for tokenized assets in the future to facilitate their development in Hong Kong.
In addition, the government has launched three pilot projects, namely NFTS issuing attendance certificates for Hong Kong Fintech Week 2022; Tokenization of government green bond issues for institutional investors to subscribe; The digital Hong Kong dollar can serve as the backbone and pillar between fiat currencies and virtual assets, providing the confidence needed to drive more innovation.
The following is the text of the declaration:
Vision and Policy
As an international financial centre, Hong Kong is open and accommodating to global innovators in the virtual asset business. We appreciate that these innovators are working in the field of distributed ledger technology (" DLT ") and developing new financial innovations that are more cost effective, inclusive, flexible and epochal. Given the appeal of virtual assets to global investors, the growing recognition of financial innovation, and the future opportunities presented by virtual assets as they move into Web 3.0 and the metaverse, we believe virtual assets have become indispensable in the market. The Government is working with the financial regulator to create an enabling environment for the sustainable and responsible development of the virtual asset industry in Hong Kong. Given the evolving nature and innovation patterns of virtual assets, we will coordinate our legal and regulatory regimes to provide an enabling environment.
We agree that DLT and Web 3.0 have the potential to be the future of finance and commerce. As long as they are properly regulated, these technologies can improve efficiency and transparency, thereby reducing or even solving current problems in settlement and payments. Hong Kong has a thriving virtual asset ecosystem, which can be seen through non-homogeneous token (" NFTS ") issuance in our market, metaverse developers, and trade finance adoption of DLT activities. If we look beyond the many other uses of virtual assets, such as the trade in art and collectibles, tokenizing antique objects, or, in terms of financial innovation, tokenizing different kinds of products (such as debt securities), there are certainly greater opportunities.
Learning from other technological developments and applications in the past, there are also risks in developing new areas, and achieving this vision will not be achieved in one step. We will do the same business, the same risk, the same rules "principle, and timely order out of the specified limits, on the one hand, innovation make virtual assets can be sustainable rapid development in Hong Kong, on the other hand can ensure mitigation and management according to international standard on financial stability, consumer protection and the fight against money laundering and terrorist financing ways as a result of actual and potential risks. As Hong Kong is an international financial centre, and virtual assets will never go far, we also need to closely monitor the evolving and innovative regulatory developments internationally and take them into account in the formulation of our regulatory regime.
regulatory
Over the past few years, the government and regulators have developed a comprehensive regulatory framework for virtual assets based on the principle of "same business, same risks, same rules". We have introduced a regulatory regime for licensing virtual asset trading platforms on an opt-in basis. On asset management, the regulator issued guidelines on the management of virtual asset funds and discretionary accounts. In addition, the regulator provides guidance to banks and financial institutions on the distribution of virtual asset-related products, the conduct of virtual asset transactions or the provision of advice on virtual assets. The regulatory regime is also widely supported by the industry. We believe that a consistent, clear and coherent regulatory framework will help lay a solid foundation for financial innovation and technological development brought about by the rapid development of virtual assets worldwide.
To further implement the above integrated regulatory framework, we have recently begun work on a licensing system for virtual asset service providers. Under the new system, Vats will be subject to the same anti-money laundering and terrorist fund-raising and investor protection requirements as traditional financial institutions. This will help the licensed Vats build their standing and credibility and enable them to reach more investors in the Hong Kong market. Another benefit is that financial intermediaries and banks will be able to partner with licensed counterparts from the virtual asset sector and, subject to the relevant regulatory conditions, offer virtual asset trading services to clients. From the perspective of virtual asset trading platforms, the licensing system allows them to develop new distribution channels in Hong Kong to tap into the vast asset and wealth management market, which is worth more than $4.5 trillion. While stepping up preparations for the new licensing system, we are also pleased to contact the global virtual assets industry to invite relevant trading platforms to explore business opportunities in Hong Kong.
Investor exposure to virtual assets
We note that global investors, both institutional and retail, are increasingly accepting virtual assets as an asset for investment allocation purposes. The Securities and Futures Commission (" SFC ") will launch a public consultation on the appropriate extent to which retail investors may trade in virtual assets under the new licensing regime. We also note that retail investors in other markets can also access virtual assets through virtual asset-related products such as exchange-traded products. The Government welcomes the possibility of introducing virtual asset exchange traded funds (ETFs) in Hong Kong and the Securities and Futures Commission will issue a circular on the issue soon. In addition, the launch of these products in Hong Kong will connect the virtual assets industry with traditional financial institutions and provide investors with well-designed products, thus facilitating the overall development of the industry in the Hong Kong market. Nevertheless, we will maintain a cautious and prudent attitude towards risks to retail investors, strengthen investor education and ensure that appropriate regulatory arrangements are in place.
Property rights in tokenized assets
We note that virtual assets have different characteristics from traditional assets, which may not be fully applicable to the existing legal categories or definitions of private property rights in Hong Kong. With a view to promoting the adoption of virtual assets and enhancing investor protection, the Government is open to reviewing the legality of property rights and smart contracts for tokenized assets in the future so as to provide a sound legal basis for property rights for tokenized assets.
Stable currency
Stablecoins are another area of focus for us. Given its purported ability to maintain value stability and its increasing use, for example as a medium of exchange for cryptocurrencies and fiat currencies, stablecoins also have the potential to interconnect with traditional financial markets, such as payment systems. Drawing on the experience of the recent crisis in virtual asset markets (crypto Winter), there is an international consensus on the need to develop appropriate regulations for the different areas of stablecoins, including governance, stabilization and redemption mechanisms. In this regard, the Hong Kong Monetary Authority (" HKMA ") issued a discussion paper on this issue earlier this year, inviting interested parties to develop a risk-based, proportional and flexible regulatory regime for the regulation of stablecoin activities involving payment purposes. The results of the consultation and the next steps will be released later.
Test plan
The Government and regulators are studying the following pilot programmes to test the technological benefits of virtual assets and to try to further apply the technology to financial markets. These pilot projects demonstrate our commitment to work with the global virtual assets industry to explore ways of financial innovation.
(a) A proof-of-concept project to launch an NFT for Hong Kong Fintech Week 2022, in which we interact with the fintech and Web3 communities;
(b) Green bond tokens to tokenize government green bond issues for institutional investors to subscribe to;
(c) The digital Hong Kong dollar can serve as the "backbone" and pillar between fiat currencies and virtual assets, providing the necessary confidence to drive more innovation.
Summary and Outlook
Hong Kong has a world-class financial infrastructure, legal and regulatory system. We are committed to promoting the sustainable development of financial services across the entire virtual asset value chain, including virtual asset issuance, tokenisation, transaction and payment platforms, financial and asset management, and depository. The Government is ready to embrace the future of finance and commerce and to support the technological development and social and economic benefits of virtual assets. We welcome the fintech and virtual assets community and talent to come to Hong Kong. We will implement the vision set out in this policy Declaration through convenient policies, integrated and balanced regulation, risk-based regulations and pilot schemes. The Government invites the global virtual assets industry to join hands with us in harnessing Hong Kong's status as an international financial centre, complying with best international standards and practices, and harnessing the potential of financial innovation in a clear, flexible and accessible regulatory environment.
Test plan
Appendix: A pilot program to test the technical benefits of virtual assets and further applications in financial markets
Non-homogeneous coin offerings
Non-homogenous token (" NFTS ") is a new kind of digital asset ownership. Art creators and companies around the world are using NFTS to build communities and connect with communities that share similar ideas and goals. In 2022, the Treasury and Investhk, which is responsible for investment promotion, launched a pilot NFT issuance programme at the annual flagship Fintech Week event to promote the use of NFTS.
The issued NFTS will be used as proof of attendance, and participants will be sent digital badges and souvenirs via blockchain technology. The NFT launch is so easy to arrange that even newcomers can easily get started. Users can store NFTS directly in their cryptocurrency wallets; Users who are new to virtual assets and do not have a cryptocurrency wallet can store it as an email address for the time being and convert it to NFTS later. During Fintech Week, we offer unique experiences for NFT holders to create their own virtual avatars in augmented reality and embark on a metaverse experience.
The Government sees this NFT launch as a proof-of-concept project to encourage the participation of the fintech community and the Web3 community and demonstrate our commitment to promote financial innovation. We will also offer offers to NFT holders, including a discounted ticket to next year's Fintech Week and early notification, Invite them to other fintech events (e.g. Fintech proof-of-concept Funding Scheme sharing sessions, fintech training sessions and other Fast Track and nurture programmes).
Tokenization of green bonds
Bond tokenization can improve the efficiency of bond issuance and settlement, reduce costs and attract more investors to the market. Following the earlier completion of Project Genesis by the HKMA and the Bank for International Settlements' Innovation Hub in Hong Kong, which developed two prototype projects using a permission-based platform and an open blockchain to conduct a proof of concept on the use of distributed ledger technology to streamline the green retail bond issuance process, the HKMA is now launching a pilot programme. Issue government tokenized green bonds for institutional investors to subscribe. The aim of the project is to test the suitability of Hong Kong's financial infrastructure and legal and regulatory environment for the use of distributed ledger technology to handle the entire bond issuance cycle (including issuance, settlement, asset servicing, secondary market buying and selling and redemption), and to provide guidance to market participants for future issuance of similar bonds. More details will be released later to inform the industry and the public about the progress of the project.
Digital hk
Virtual assets and cryptocurrencies are products of technological innovation. However, they are not legally recognized as legal payment methods and cannot be fully and effectively used for payment purposes. Therefore, they cannot be legal tender in Hong Kong. While we expect virtual assets and cryptocurrencies to drive various financial innovations, as mentioned above, the Government and regulators believe that Hong Kong should simultaneously explore the possibility of introducing a central bank digital currency (i.e., a "digital Hong Kong dollar").
The HKMA had earlier consulted the market and the results showed that respondents supported the introduction of the "digital Hong Kong Dollar" and believed that the "digital Hong Kong Dollar" would enhance payment efficiency and contribute to the development of Hong Kong's digital economy. To prepare for the possible introduction of a "digital Hong Kong Dollar", the HKMA will adopt a three-track approach to explore the following issues in a phased manner: 1) the technical and legal basis for a "digital Hong Kong Dollar"; 2) Usage and design; And 3) the launch schedule of the "digital Hong Kong Dollar". We believe that for the global virtual asset industry, the significance of the "digital Hong Kong Dollar" is that it can serve as the "backbone" and pillar of the link between fiat currencies and virtual assets. Therefore, it can provide price stability and confidence. With these two elements, we can promote more financial innovation of security token issuance across different asset classes.
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