In 2023, Hong Kong has introduced a series of policies that are conducive to the development of the web3 industry, let's take a look at the specific timeline!
On January 31, 2023, the Hong Kong Monetary Authority (HKMA) issued a "Conclusion of the Discussion Paper on Crypto Assets and Stablecoins", which clarified the proposed approximate regulatory scheme parameters based on feedback from previous discussion papers, and gave a detailed description of regulatory activities, target implementation timelines, licenses, regulatory principles, etc.
Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, said that an appropriate regulatory environment will help address the financial stability risks that may arise from stablecoins and promote the orderly and sustainable development of the industry. In finalising the specific regulatory arrangements, we will take into account the views gathered, the latest market developments and international discussions, and maintain communication with stakeholders and market participants with a view to implementing the regulatory arrangements in 2023-2024.
On 16 February, the Hong Kong SAR government announced the successful offering of HK$800 million tokenised green bonds. This is the world's first tokenized green bond issued by a government. The offering was underwritten by four banks, two of which also acted as investor custodians.
The Financial Secretary of the HKSAR Government, Mr Paul Chan, said that Hong Kong has been actively promoting the application of innovation and technology in the financial sector, and actively exploring new concepts and technologies to enhance the efficiency, transparency and security of financial transactions. The successful issuance of the tokenised green bond is a milestone in Hong Kong's ability to combine bond markets, green and sustainable finance, and fintech. The HKSAR Government will continue to promote the innovative development of the financial market.
On 20 February, the Hong Kong Securities and Futures Commission (SFC) said it was ready to launch a consultation on the proposed requirements applicable to virtual asset trading platform operators. The plan to allow retail investors to trade digital tokens such as Bitcoin and Ether means that the region has taken a significant step towards its goal of becoming a crypto hub in Asia.
Cyberport has set up a Web3 base earlier this year
On February 22, Hong Kong's financial secretary said that it would allocate 50 million yuan to accelerate the development of the Web3 ecosystem and set up a task force for the development of virtual assets.
The Financial Secretary of the HKSAR Government, Paul Chan, said in his speech on the 2023-2024 Budget of the HKSAR Government. "Hong Kong has set up a Web3 base earlier this year. I will allocate $50 million to accelerate the development of the Web3 ecosystem, including organising large-scale international seminars to enable the industry and enterprises to better grasp cutting-edge developments, promote cross-sector business collaboration, and organise more youth workshops. ”
On April 11, the Hong Kong Web3.0 Association was established, which was jointly initiated by a number of Chinese-funded institutions in Hong Kong and Hong Kong universities, including academicians of the Chinese Academy of Engineering, members of the Legislative Council of the Hong Kong Special Administrative Region, fintech industry providers, university professors and other people from all walks of life.
On May 18, the Hong Kong Monetary Authority (HKMA) announced the launch of the "e-HKD" pilot programme, in which 16 selected companies from the financial, payment and technology sectors will conduct the first round of trials within this year. The trial will delve into the potential use cases of e-HKD in six areas, including full payments, programmable payments, offline payments, tokenised deposits, third-generation Internet (Web3) transaction settlement and tokenised asset settlement. Through trial and error, the HKMA can draw practical experience from the results of each trial and refine the possible implementation of e-HKD.
On 31 May, the Hong Kong Securities and Futures Commission (SFC) issued a circular on the transitional arrangements for the new licensing regime for virtual asset trading platforms, which are intended to be implemented on 1 June 2023 Virtual asset trading platforms that are currently providing virtual asset services in Hong Kong and are ready to comply with the SFC's guidelines should be provided with a reasonable sufficient amount of time for them to apply for licenses and review and revise their systems and controls to comply with applicable legal and regulatory requirements. Virtual asset trading platforms that do not intend to apply for a licence should proceed with winding up their business in an orderly manner.
A virtual asset trading platform that was providing virtual asset services in Hong Kong before 1 June 2023 and has a meaningful and substantial business may continue to provide virtual asset services in Hong Kong under the non-contravention arrangement without contravening the licensing requirements under the AMLO for a period from 1 June 2023 to 31 May 2024 (i.e. the first 12 months from 1 June 2023). To be eligible to participate in the transitional arrangement, a virtual asset trading platform must have provided virtual asset services in Hong Kong before 1 June 2023. On 1 June, the Guidelines for Virtual Asset Trading Platform Operators came into effect.
On 3 August, HashKey Exchange received approval for the upgrade of its Type 1 and Type 7 licenses, and OSL Digital Securities Limited received approval from the Hong Kong Securities and Futures Commission to upgrade its existing licenses.
On 29 September, the SFC of Hong Kong today published a list of virtual asset trading platforms on its website, including: "List of Licensed Virtual Asset Trading Platforms" which lists the names of virtual asset trading platform operators duly licensed by the SFC; Set out the names of the virtual asset trading platform operators that are required to cease business within a specified period under the relevant legislation, and the "List of Deemed Licensed Virtual Asset Trading Platforms" sets out the names of the virtual asset trading platform operators deemed to be licensed as of 1 June 2024.
On 20 October, the Hong Kong Monetary Authority (HKMA) established a Central Bank Digital Currency (CBDC) Expert Panel and signed a Memorandum of Understanding (MoU) with five local universities to participate in the research work of the Panel. The five participating universities are the Chinese University of Hong Kong, the City University of Hong Kong, the Hong Kong Polytechnic University, the Hong Kong University of Science and Technology and the University of Hong Kong. The HKMA has indicated that it will also consider inviting academics from overseas universities to participate in the Expert Panel in the future.
On 30 October, the Hong Kong Monetary Authority (HKMA) released the Report on the Phase 1 of the e-HKD Pilot Scheme. The first phase of the pilot scheme has shown that e-HKD may bring unique value to Hong Kong's existing payment ecosystem in three areas, including programmability, tokenisation and instant settlement.
On November 2, the Hong Kong Securities and Futures Commission issued a notice on the growing interest of financial institutions in the tokenization of traditional financial instruments. Regulators have provided new guidance for intermediaries entering this space, exploring the tokenization of securities, and distributing tokenized securities to clients.
On 22 December, the SFC issued the Joint Circular on Virtual Asset-related Activities of Intermediaries (the "Joint Circular") and the Circular on Investments in Virtual Assets by SFC-authorised Funds (the "Fund Circular"), and stated that it was "ready to accept applications for authorization of virtual asset spot ETFs".
The SFC has authorized virtual asset futures exchange-traded funds (ETFs) and is ready to accept applications for authorization of other funds involving virtual assets, including virtual asset spot ETFs. The Head of Securities Product Development at the Hong Kong Stock Exchange (00388.HK), Paul Lo, said that HKEX is ready to seize the opportunities presented by thematic investing and will work closely with issuers and various stakeholders to smoothly introduce such new products to the Hong Kong ETF market.
According to the SFC, VA futures are only allowed to be traded on traditional regulated futures exchanges, and the management company must demonstrate that (i) the underlying VA futures are sufficiently liquid, (ii) the rollover costs of the underlying VA futures are manageable, and how such rolling costs are managed. SFC-authorised virtual asset funds that are to handle spot VA transactions and acquisitions should do so on a SFC-licensed virtual asset trading platform or an authorized financial institution (or an authorized locally-incorporated subsidiary), in particular with respect to the following two requirements: (a) for cash subscription and redemption, the SFC-authorized cash ETF should acquire and dispose of spot virtual assets through a licensed virtual asset trading platform; Spot virtual assets held locally or overseas should be transferred to SFC-authorized spot virtual asset ETFs.