The Government today issued a policy statement on the development of virtual assets (VA) in Hong Kong, which sets out its policy stance and approach towards developing a vibrant sector and ecosystem for VA in the city.

The statement covers the Government's vision and approach that it, in conjunction with the financial regulators, are working towards providing a facilitating environment for promoting sustainable and responsible development of the VA sector in Hong Kong. Timely and necessary guardrails will be put in place to mitigate actual and potential risks in line with international standards, so that VA innovations can thrive in the city in a sustainable manner.

Regarding regulations, the Government said as it steps up our preparatory work for a new licensing regime for VA service providers, it is ready to engage with global VA exchanges and invite them to set foot in Hong Kong for new business opportunities.

The Securities & Futures Commission will conduct a public consultation on how retail investors may be given a suitable degree of access to VA, and Hong Kong will be open to the possibility of having Exchange Traded Funds (ETFs) on VA in its market.

The Government is open to future review on property rights for tokenised assets and the legality of smart contracts, so as to facilitate their development in Hong Kong. Consultation outcome and next steps will be announced in due course by the Monetary Authority on the regulatory regime for stablecoins.

Moreover, the Government and the regulators are exploring a number of pilot projects to test the technological benefits brought by VA and their further applications in the financial markets. These projects include non-fungible token (NFT) issuance for Hong Kong Fintech Week 2022, Green bond tokenisation, and e-HKD.

Looking ahead, the vision presented in the policy statement will be achieved by facilitating policies, comprehensive and balanced regulations, risk-based guardrails, as well as our pilot projects.

Financial Secretary Paul Chan said the policy statement explains in detail the Government's vision and approach, regulatory regimes, thoughts on investors' exposures, and our pilot projects to embrace the technological benefits and financial innovations brought by VA.

“Our policy stance on VA is now clearly communicated to the global markets and it serves to demonstrate our commitment and determination to explore financial innovations together with the global VA community,” Mr Chan added.

Secretary for Financial Services & the Treasury Christopher Hui said: “We recognise the potential of DLT and Web 3.0 to become the future of finance and commerce, and under proper regulation they are expected to enhance efficiency and transparency.”

Mr Hui noted that the Government is prepared to embrace this future, and welcomes the clustering of Fintech and VA community and talents in Hong Kong, and the Government will promote the sustainable development of financial services across the whole VA value chain.