Hong Kong's financial regulators unveiled sweeping changes to digital asset regulations Monday, allowing virtual trading platforms to share order books with overseas affiliates and lowering barriers for stablecoin distribution as the city accelerates its push to compete with Singapore and the United States in the cryptocurrency market.
What to Know:
- Hong Kong's Securities and Futures Commission will permit locally licensed virtual asset trading platforms to share global order books with affiliated entities abroad, ending the requirement that order books be ring-fenced domestically.
- Virtual asset trading platforms can now distribute Hong Kong-regulated stablecoins and virtual assets with less than a 12-month track record to professional investors, removing the previous one-year minimum requirement.
- The Hong Kong Monetary Authority projects spending on digital transformation and tokenisation to exceed HK$100 billion ($12.9 billion) annually over the next three years as part of its "Fintech 2030" roadmap.
Regulatory Changes and Market Access
The Securities and Futures Commission relaxed restrictions Monday that required virtual asset trading platforms to maintain separate order books in Hong Kong. Julia Leung, CEO of the securities watchdog, announced the changes at the Hong Kong Fintech Week conference. An order book lists buy and sell orders for virtual assets.
The modifications allow platforms to access global liquidity pools.
Virtual asset trading platforms will also gain permission to distribute stablecoins and virtual assets to professional investors without the previous requirement that these products demonstrate a one-year track record. The regulatory adjustments reflect Hong Kong's intensified competition with other financial centers amid growing demand for digital investments.
Hong Kong has become a testing ground for tokenised financial products this year. The city witnessed multiple launches of tokenised Hong Kong dollar and U.S. dollar money market funds. These products follow a global pattern where digital-native capital seeks yield-generating investments.
Fintech 2030 and Investment Surge
The Hong Kong Monetary Authority, the city's de facto central bank, introduced its "Fintech 2030" roadmap Monday. The plan focuses on four areas: data, artificial intelligence, resilience and tokenisation. The authority will advance its Ensemble sandbox to enable real-value transactions in tokenised deposits and digital assets.
"We will now begin incubating mature real-value use cases where tokenised deposits can offer significant advantages, starting with tokenised money market funds," Eddie Yue, chief executive of the monetary authority, said at the conference. The regulator did not provide specific details about these real-value applications.
Financial institutions are expected to spend more than HK$100 billion annually on technological infrastructure over the next three years.
Tokenisation converts traditional assets into digital tokens that can be traded on blockchain networks. This process allows for fractional ownership and potentially increases liquidity. Stablecoins are cryptocurrencies designed to maintain a stable value by pegging them to traditional currencies or other assets.
Major global banks operating in Hong Kong reported significant adoption of tokenised products. Georges Elhedery, CEO of HSBC, said during a panel discussion that the bank's tokenised gold product launched in Hong Kong has become the third largest such product globally. He noted "mass adoption by retail customers."
Bill Winters, chief executive of Standard Chartered, offered a broader view of the market's direction.
"Our belief, which I think is shared by the leadership of Hong Kong, is that pretty much all transactions will settle on blockchains eventually, and that all money will be digital," Winters said during the same panel.
Closing Thoughts
Hong Kong's regulatory changes position the city to capture a larger share of digital asset trading as traditional and cryptocurrency markets converge. The moves signal confidence that institutional and retail investors will continue migrating toward blockchain-based financial products. Two executives from major global banks said Monday that tokenised products are drawing sizable flows as digitalised currency becomes mainstream.
