Hong Kong is doubling down on efforts to establish itself as a global innovation hub following the release of its Policy Statement 2.0 on the Development of Digital Assets on Thursday.

The statement has been welcomed by industry insiders, who said it provides clearer guidance for the digital asset sector and creates a favorable environment for growth. They expect this move to help attract more global capital and top-tier talent to the city.  

Building on the foundations of the initial policy statement released in October 2022, the latest edition lays out a vision for a trusted and innovative digital asset (DA) ecosystem. It prioritizes risk management and investor protection, while delivering tangible benefits to the real economy and financial markets.

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The statement introduces a “LEAP” framework, which stands for legal and regulatory streamlining; expanding the suite of tokenized products; advancing use cases and cross-sector collaboration; as well as people and partnership development.

Key measures include supporting stablecoin-related projects and expanding the application of tokenized products, such as regular issuance of tokenized government bonds and exploring stablecoins as a payment tool.  

Christopher Hui Ching-yu, secretary for financial services and the treasury, said, “The latest statement keeps Hong Kong at the forefront of digital transformation, offering a clear roadmap for businesses and investors to thrive in a secure and vibrant digital asset market.”

Financial Secretary Paul Chan Mo-po said, “We strive to build a more flourishing DA ecosystem which will integrate the real economy with social life through a prudent regulatory regime and encouragement to market innovation.”

This approach will benefit both the economy and society, while consolidating Hong Kong’s position as a leading international financial center, he noted.

Chan said he believes digital assets hold great development potential and play an important role in the progress of fintech. Through blockchain technology, they could enable more efficient and cost-effective financial transactions, making financial services more inclusive, he added.

On the regulatory front, the city’s Securities and Futures Commission (SFC) will be the leading authority for the upcoming licensing regimes for digital asset dealing service providers and custodians, while the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) will spearhead a comprehensive legal review to facilitate the tokenization of real-world assets and financial instruments.

The FSTB said in a social media post that it would launch a public consultation on the licensing regimes in collaboration with the SFC.  

To enrich tokenized products, the special administrative region government stated it plans to regularize the issuance of tokenized government bonds, and provide incentives for the tokenization of real-world assets, such as clarifying stamp duty arrangements for tokenized exchange-traded funds.

The government also said it welcomes proposals from market participants to test the use of licensed stablecoins that are expected to be launched after the Stablecoins Ordinance takes effect on August 1.

Anna Liu, CEO of digital asset service provider HashKey Tokenisation, said the new statement offers clear guidance and significant benefits for the industry.

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For instance, it supports the tokenization of revenue streams from real-world assets like electric vehicle (EV) charging stations, which Liu said will expand the use of tokenization and drive the integration of the real economy with digital finance.  

Tan Yueheng, a Hong Kong lawmaker, said the move demonstrates Hong Kong’s commitment to embracing financial technology and innovation while maintaining robust risk management. This will attract more international capital and professionals to the city, and greatly enhance market liquidity and efficiency, he said.

Tan also applauded the government’s decision to replace the term “virtual assets” with “digital assets”, noting that the shift addresses investor concerns and better reflects the nature of related products.

Contact the writer at irisli@chinadailyhk.com