Assistant Chief Executive of the Hong Kong Monetary Authority: Banks must separate virtual assets from their own assets if they custody them

Au Yuk-lin, Assistant Chief Executive (Banking Conduct) of the Hong Kong Monetary Authority, said that the guidance on the sale of tokenized products applies to digital representations of real assets on the ledger, such as structured investments that are not regulated by the Securities and Futures Ordinance. products, spot precious metals and deposit products, etc. The guidance covers relevant due diligence, product and risk disclosures, as well as risk management systems and controls, with the aim of providing appropriate protection to bank customers. Ou Yulin explained that the above-mentioned real assets themselves have safeguard measures. If they are tokenized in the future, there may be additional risks (mainly technological risks). For example, the tokenized products may be hacked or the system may stop operating. As for the guidance on virtual asset custody, it applies to digital assets using DLT or similar technologies, such as virtual assets, tokenized securities, and other tokenized assets. Ou Yulin said that when banks take custody of such assets for customers, they must comply with five standards. One of them is that banks must separate their own assets from customers’ digital assets. Other standards include risk management, protection of customer assets, and service provision. conduct due diligence and provide disclosures, etc. (Ta Kung Pao)