On October 31, at this year's Hong Kong Financial Technology Week, the Hong Kong Special Administrative Region Government issued the "Policy Declaration on the Development of Virtual Assets in Hong Kong" (hereinafter referred to as the Policy Declaration), expounding its policy stance on the development of the virtual asset industry and ecosystem and policy.
"Hong Kong is an international financial center, and has an open and inclusive attitude towards global innovators engaged in virtual asset business." The policy declaration pointed out that due to the attractiveness of virtual assets to global investors and the recognition of financial innovation With the increase, coupled with the future opportunities brought by virtual assets entering the field of Web 3.0 and Metaverse, virtual assets have become indispensable in the market. The SAR government is now working with financial regulators to create a favorable environment to promote the sustainable and responsible development of Hong Kong's virtual asset industry.
Promote the development of Hong Kong into an international virtual asset center
Previously, on October 16, Chen Maobo, the Financial Secretary of the Hong Kong Special Administrative Region, had announced that the policy declaration would demonstrate the SAR government’s vision to promote Hong Kong’s development into an international virtual asset center, as well as its commitment and determination to explore financial innovation with the global asset industry.
"Virtual assets are an important development direction of financial technology. Hong Kong faces competition from Singapore in this field." Zou Chuanwei, chief economist of Wanxiang Blockchain, said in an interview with The Paper (www.thepaper.cn).
"In fact, Hong Kong is trying to build a brand-new Asian financial technology center. Hong Kong chooses financial scenarios, especially virtual assets, to release the vitality of financial technology." Liu Yang, an expert in financial technology and digital economy research, analyzed to The Paper road.
Hu Jie, a professor at the Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University, believes that "this shows that the Hong Kong SAR government recognizes the virtual asset industry track." He mentioned that there have been some problems in this track, so many governments are observing and considering this What benefits can the track bring, and what risks will it bring. "Looking at it now, governments around the world are gradually forming a consensus that virtual assets and related industries are one of the very important tracks in the future. On the other hand, Hong Kong is facing very real competition, including very strong competition from Singapore. Based on the importance and competitive factors of the track, the Hong Kong Special Administrative Region government has made a clear statement this time, it is to embrace this track, and at the same time, in the competition of the international financial center, it will not lose on the new track.”
Preparations for a new licensing regime for virtual asset service providers
In terms of regulation, the policy declaration proposes to adopt a consistent, clear and clear regulatory framework, which will help lay a solid foundation to meet the financial innovation and technological development brought about by the rapid development of global virtual assets.
"Hong Kong's declaration to further open up the virtual asset market can be considered as an inclusive regulation. It intends to attract innovative teams such as virtual asset technology, business, and market with loose regulation. Market empowerment, optimize the stock, and innovate in products and scenarios such as encrypted digital currency, digital Hong Kong dollar, and non-homogeneous tokens (NFT), and attract more investors for non-traditional financial products, especially those in the digital age. young people.” Liu Yang said, “This can be seen as an important move for Hong Kong to strengthen its status as a global financial center and attract young investors.”
In the policy declaration, the Hong Kong Special Administrative Region government stated, "While stepping up preparations for the licensing system for new virtual asset service providers, we are also happy to contact the global virtual asset industry and invite relevant exchanges to explore business opportunities in Hong Kong."
"This shows that the Hong Kong SAR government is open to virtual asset services and is willing to attract relevant innovative institutions, but requires these institutions to operate in compliance with licenses." Zou Chuanwei said.
Liu Yang said that licensed operation is an effective means to bring financial activities into supervision. "In order to provide large-scale virtual asset services in Hong Kong, it is necessary to build an independent, controllable and safe virtual asset trading system. Therefore, Hong Kong may refer to the existing capital market rules, refer to the technical laws and risk control of financial technology, and register and issue virtual assets. , Transaction (payment), risk control and other links implement licensed transactions.”
Virtual assets and cryptocurrencies are not legal means of payment
The Paper reporter noticed that the Hong Kong Special Administrative Region government defined virtual assets and cryptocurrencies as products of technological innovation in the policy declaration, and also emphasized that they are not legally recognized legal payment methods.
Hu Jie believes that the definition of technological innovation products means that the Hong Kong SAR government should seriously study virtual assets with an attitude of facing technological innovation, expressing an attitude of acceptance, tolerance, observation, research, and development. "At the same time, for specific applications, the Hong Kong Special Administrative Region government has made a phased guideline, that is, there are various assets in virtual assets, but not all assets are naturally exchange intermediaries, that is, currencies. Virtual assets are absolutely Most of them are not suitable for currency, for example, they cannot maintain the stability of the currency value. The most fundamental requirement of currency is that the currency value should be stable." He emphasized that this shows a cautious attitude of the Hong Kong SAR government, that is, temporarily does not recognize the virtual Assets are considered as currency and are not allowed to be used as payment vehicles for taxes, court rulings, and key financial institutions (such as banks) settlements.
Zou Chuanwei said, "The virtual assets clearly listed in the declaration include non-homogeneous tokens (NFT), tokenized assets (such as green bond tokenization), and stable coins. Non-homogeneous tokens and tokenized assets are The new asset type itself cannot assume the function of currency. Due to the lack of a sound regulatory framework in terms of governance, stability and redemption mechanisms, stablecoins involved in payment may not be able to maintain stable value and stable operation under any conditions , so it is not a legal payment method recognized by the law."
"Encrypted digital currency advocates claim that government intervention can be avoided through decentralized mechanism arrangements, and currency value and price stability can be achieved. However, at the current stage of economic and social development, no country's economy can do without the adjustment of monetary policy. No country relies solely on consensus and self-governance to achieve good governance, and the scientific governance of the benefit society requires centralized institutional arrangements. This is the paradox faced by decentralized encrypted digital currencies.” Liu Yang said.
Liu Yang said that looking at the developed financial markets around the world, inclusiveness and prudence are still the basic principles for the regulation of virtual assets and encrypted digital currencies. "Conversely, under the reality that technological evil cannot pass the ethical and regulatory constraints, Hong Kong may become a test area for technological innovation, scene creation, platform creation and ecological construction of virtual assets, but it is definitely not an unregulated derivative financial risk. Especially compared with the traditional financial market, the complexity and concealment of technology and data make supervision more difficult. Therefore, the policy declaration clearly optimizes the business environment for the financial technology behind virtual assets and builds a stage for innovation and entrepreneurship. But it also clearly shows payment risks such as money laundering, fraud, illegal fundraising, and fluctuations in currency value.”
NFT, Green Bond Tokenization and Pilot Programs for Digital Hong Kong Dollar
The policy declaration also mentioned that the Hong Kong Special Administrative Region government and regulatory agencies are studying the launch of the following pilot programs to test the technical benefits of virtual assets and try to further apply the relevant technologies to the financial market. These pilot programs include the issuance of non-fungible tokens (NFTs) for the Hong Kong Fintech Week 2022, the tokenization of green bonds, and a digital Hong Kong dollar.
"The issuance of non-homogeneous tokens (NFT) during the Hong Kong Fintech Week in 2022 is mainly for digital commemorative badges for participants, which have social attributes and can increase the stickiness of participants." Zou Chuanwei said, "Green bond Monetization refers to two prototype research projects, Daml and Liberty, which are jointly developed by the Hong Kong Monetary Authority and the Bank for International Settlements. This will improve the market liquidity of green bonds and enhance the transparency and traceability of information for retail investors in the secondary market."
Hu Jie believes that these pilot programs are of symbolic significance, showing the attitude of the HKSAR government. "The tokenization of green bonds is also very meaningful. It represents the tokenization of traditional financial assets. There are many traditional financial assets, including stocks, bonds, futures, etc. The Hong Kong Special Administrative Region government chose the topical green bond and put it Tokenization, changing its form of expression from paper or traditional bookkeeping to a certificate circulating on the public ledger, is logically a transformation of form. In a declarative sense, it shows that Positive attitude towards distributed ledgers and token tools.”
On September 20, the Hong Kong Monetary Authority (hereinafter referred to as the Hong Kong Monetary Authority) published a policy position paper entitled ""Cyber Hong Kong Dollar" - A New Step", explaining the HKMA's policy on the central bank's digital currency at the retail level (ie, "digital Hong Kong dollar"). Hong Kong Dollar” or e-HKD) policy stance and future development direction.
Zou Chuanwei analyzed that "the digital Hong Kong dollar belongs to the retail central bank digital currency and needs to be compatible with the linked exchange rate system of the Hong Kong dollar. The Hong Kong Monetary Authority has discussed three possible digital Hong Kong dollar issuance mechanisms, and the interoperability of the digital Hong Kong dollar with large payment systems and retail payment systems." security, as well as privacy and data protection issues. The digital Hong Kong dollar is of great significance for supporting payment innovation in the digital economy, improving the resilience and effectiveness of the payment system, and addressing the challenges of emerging currencies (mainly stablecoins).”
"The Hong Kong Special Administrative Region government uses this new type of distributed ledger supported by the new blockchain technology to complete the traditional central bank's legal currency issuance. This is a new attempt. Now all countries in the world are exploring, and China is in the lead At the forefront.” Hu Jie said, “Hong Kong’s active embrace of new tracks actually has a positive effect on mainland practitioners. Specifically, they may even consider developing their business in Hong Kong or conducting more cutting-edge exploration.”
Zhang Chao, a blockchain product technology expert, vice president of Okey Cloud Chain Group, and executive director of Okey Cloud Chain Holdings (1499.HK), said, "A free and stable financial environment is a necessary condition for establishing an international virtual asset center. Technology Security is the cornerstone of this environment.” He said, “The region’s economic development speed, breadth and depth of economic scale are also important factors in maintaining the status of an international virtual asset center. It is precisely because of the rapid economic development of Hong Kong and the With the status of an international financial center, we have witnessed a brand-new digital world from conception to reality."
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