The Hong Kong virtual asset market in 2023 will be full of color.

From 2018, Hong Kong’s “still half-hidden” view of the encryption industry, with only a few glimpses; in recent years, in the face of East Asia’s strong financial rival Singapore’s eager eyes and The Chinese self-deprecated the "Crypto-Jewish" context, and Hong Kong announced in October 2022 that the "competition for the global virtual asset center" will be completely All-in, and the Chinese-speaking circle was skeptical; until the Hong Kong Wanxiang Carnival Summit in April 2023, there was a lot of excitement and the start of A mixed carnival of fish and dragons.

After June 2023, a series of intensive virtual asset policies have been implemented at a speed exceeding expectations, from exchange licensing to new STO regulations, licensed funds and ETFs, and stable currency regulations, creating inspiring and enlightening innovations. It has created a world-leading favorable regulatory environment; in the second half of the year, Hong Kong virtual asset exchanges, securities firms, asset management funds, venture capital institutions, and OTC merchants have successively launched business. Although the initial infrastructure was insufficient and there were some losses, all businesses are now in operation. stand up.

On the other side, Hong Kong's traditional financial market is bleak and self-deprecating about the "ruins of Hong Kong's financial center." The emerging market for virtual assets may become a booster for Hong Kong’s financial market, attracting traditional financial institutions from Hong Kong and mainland China to enter the market.

As of 2023, we believe that Hong Kong has basically established a firm foothold in the global virtual asset market competition and has created a world-leading With a favorable regulatory environment, along with the next crypto bull market and the U.S. interest rate cut cycle, Hong Kong will be based in East Asia, radiate around the world, and have the opportunity to lead the global crypto market.

The light has appeared.

At this moment, Bailu Living Room will lead everyone to review the context of Hong Kong’s virtual asset policy in 2023, and gain a deep understanding of the compliance process from the financial supervision side. On the basis of security compliance on the market, be prepared to better seize the market dividends in the next two years and in the longer term and on a larger scale.

Hong Kong Virtual Asset Policy Timeline:

2021 In May, the Treasury Bureau of the Hong Kong Monetary Authority launched a public consultation on the "Legislative Proposal on Strengthening Regulation of Combating Money Laundering and Counter-Terrorist Financing in Hong Kong" to discuss the licensing system for virtual asset service providers;

On October 31, 2022, the "Policy Declaration on the Development of Virtual Assets in Hong Kong" was released;

December 8, 2022 , the "Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022" was officially passed by the Legislative Council, and virtual asset service providers are officially regulated by Hong Kong law;

On January 31, 2023, the Hong Kong Monetary Authority released the consultation summary on the discussion paper on virtual assets and stable coins;

On May 16, 2023, the official website of the Hong Kong Monetary Authority announced the " Public consultation results on "Guidelines on Combating Money Laundering and Terrorist Financing";

On May 31, 2023, the official website of the Hong Kong Securities and Futures Commission announced the "Relevant Implementation of Special Guidelines for Virtual Asset Transactions" Circular on the new licensing system for the virtual asset trading platform”;

On June 1, 2023, the new licensing system for the virtual asset trading platform will take effect;

On October 20, 2023, the "Joint Circular on Virtual Asset-related Activities of Intermediaries" was released, and securities firms and banks can carry out virtual asset retail business with a license;< /p>

On November 2, 2023, the "Circular Regarding Intermediaries Engaging in Tokenized Securities-related Activities" was released, and STO does not require mandatory professional investors; on the same day, "Circular on Tokenized Investment Products Recognized by the Securities and Futures Commission" was released;

On December 22, 2023, the official website of the Hong Kong Securities and Futures Commission announced the "Relevant on Securities and Futures Commission-Recognized Investment Products" "Notice on Funds Involving Virtual Assets" and be prepared to accept applications for virtual asset spot ETFs; on the same day, the "Joint Circular on Virtual Asset-related Activities of Intermediaries" was updated to clarify the distribution of virtual asset spot ETFs, including Regulations;

On December 27, 2023, the Hong Kong Treasury Bureau and the Hong Kong Monetary Authority jointly issued a public consultation document to collect suggestions on new legislation on stable currencies.

Virtual asset trading platform licensing system is implemented

What is important in Hong Kong in 2023 is the launch of a compliant virtual asset trading platform. After many years of work, the Hong Kong Treasury Bureau, the Hong Kong Monetary Authority, and the Securities and Futures Commission joined forces and communicated with the industry many times to finally implement the virtual asset trading platform licensing system.

In May 2021, the Treasury Bureau of the Hong Kong Monetary Authority launched a public consultation on "Legislative Proposals on Strengthening Regulation of Combating Money Laundering and Counter-Terrorist Financing in Hong Kong" , focused on the discussion of "Recommendations on Establishing a Licensing System for Virtual Asset Service Providers", affirmed the legislative needs of the licensing system, and clarified the scope of coverage, licensing conditions and supervision methods.

On December 8, 2022, the Legislative Council officially passed the new regulations on virtual assets. Hong Kong officially regulates virtual assets and has a clear definition of virtual assets.

On May 31, 2023, the official website of the Hong Kong Securities and Futures Commission released the "Notice on the Implementation of a New Licensing System Designed for Virtual Asset Trading Platforms" Letter". The circular states:The new licensing system specifically designed for centralized virtual asset trading platforms under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance will come into effect on June 1, 2023. Under the new system, centralized virtual asset trading platforms operating in Hong Kong will be required to apply for a license from the Securities and Futures Commission under the Securities and Futures Ordinance and/or the Anti-Money Laundering Ordinance.

At the same time, the circular issued the latest regulatory requirements, including the "Guidelines Applicable to Virtual Asset Trading Platform Operators", "Guidelines on Combating Money Laundering and Counter-Terrorist Financing", "Applicable Guidelines issued by the Securities and Futures Commission" Guidelines on the Prevention of Money Laundering and Counter-Terrorist Financing for Licensed Corporations and Associated Entities of Virtual Asset Service Providers Licensed by the SFC, and the Licensing Manual for Virtual Asset Trading Platform Operators.

Since then, the licensing system has been officially implemented, and the war for licensed trading platforms in Hong Kong has officially begun.

OSL and Hashkey layouts are the longest. On August 3, 2023, the two platforms announced on the same day that they had received approval from the Hong Kong Securities Regulatory Commission to provide virtual asset trading services to retail customers, marking Hong Kong's entry into the era of retail investors.

As of the date of publication, in addition to the two licensed exchanges, a total of 11 institutions have submitted applications for virtual asset exchange licenses . It also indicates that Hong Kong’s virtual asset market still has huge potential and opportunities, waiting for investors to discover.

Trillions of traditional securities firms and banks’ retail admissions

On October 20, 2023, the official website of the Hong Kong Securities Regulatory Commission was released to the public The announcement of the "Joint Circular Concerning Virtual Asset-Related Activities of Intermediaries"reignited market enthusiasm.

The circular provides new explanations on virtual asset-related businesses in Hong Kong in five aspects. Including: distributing virtual asset related products (requires holding a virtual asset license No. 1), providing virtual asset trading services (requiring a virtual asset license No. 7), and providing asset management services for virtual assets (requiring a virtual asset license No. 9) , Provide opinions on virtual assets (requires holding No. 4 virtual asset license) and specific implementation methods.

According to the previous bill, retail customer business can only be carried out by compliant exchanges. After this circular is updated,If a securities firm or bank holds virtual With Asset No. 1 and No. 4, you can carry out virtual asset and security token STO business for C-end retail users by upgrading the virtual asset license. And it is clearly stated that digital asset custody can be managed by banks and other traditional financial institutions themselves.

After the implementation of this move, it will be a shot in the arm for the further expansion of Hong Kong’s virtual asset market. The handling fees of licensed and compliant virtual asset trading platforms lack a competitive advantage. In addition, the virtual asset market fluctuates significantly, and learning costs are extremely high. The growth rate of retail users has always been slow. After the issuance of the circular, the exposure of traditional banks and securities firms will be opened, and more traditional investors who intend to invest in virtual assets can directly invest in virtual assets through traditional institutions, which may bring about trillion-level market growth. quantity.

As soon as the circular came out, the results were remarkable. Taking Victory Securities, the first Hong Kong local securities firm to start virtual asset retail business, as an example. As of December 30, 2023, Chen Peiquan, executive director of Victory Securities, reported that since the company launched virtual asset trading services in response to the policy, the average monthly With a turnover of US$10 million, its virtual asset business has achieved profitability, with investments mainly in Bitcoin accounting for approximately 80% of its overall virtual asset investment. As more traditional securities firms join, the growth rate of virtual asset-related customers will still double in 2024.

For details, please refer to: Trillions of traditional securities firms and banks are entering the retail market! Interpretation of the new version of Hong Kong’s virtual asset intermediary circular

Major adjustment after four years: STO
No need to force "professional investors only"

On November 2, 2023, the official website of the Hong Kong Securities and Futures Commission issued the "Notice on Intermediaries Engaging in Tokenized Securities-related Activities" Letter", which replaces the "Statement on Security Token Issuance" issued on March 29, 2019.

The circular makes important clarifications on two important issues: whether tokenized securities are complex products and whether restrictions only for professional investors should be imposed. According to the content of the circular: Tokenized securities no longer need to impose "professional investors only" restrictions; at the same time, the relevant vocabulary, the nature of tokenized securities, new risks caused by tokenization, and when engaging in tokenization New explanations have been given on factors that must be considered when conducting securities-related activities.

On the same day, the official website of the Hong Kong Securities and Futures Commission released the "Circular on Tokenized SFC-Recognized Investment Products" What will be considered:Provisions that would allow the tokenization of investment products offered to the public in Hong Kong that are authorized under Part IV of the Securities and Futures Ordinance. And focus on the primary market, making various requirements such as token management, public disclosure, intermediaries, and employee capabilities.

It has been 4 years since the last policy change. With this update of the circular, Hong Kong has prepared the soil for financial innovation based on STO to take root. The market responded equally quickly, and institutions such as CSpro, Harvest Fund, and OSL began to prepare corresponding products.

From the promotion of digital Hong Kong dollars to the blockchain issuance of Hong Kong government green bonds; various promotion experiments are continuously carried out. By the launch of new STO regulations in 2023, Hong Kong The government's attitude has been very clear: Hong Kong will fully support various types of traditional securities, as well as financial innovations such as tokenization of physical assets including RWA; the Hong Kong government also supports opening up STO adoption to the market and more people, leading Hong Kong Truly embark on the road to building the world's Web3.0 financial center.

For relevant content of the circular, please refer to: Big adjustment after four years! Hong Kong Securities and Futures Commission: STO does not need to be "professional investors only"; New Hong Kong STO regulations: Circular on tokenized investment products recognized by the Securities and Futures Commission

< strong>Bitcoin/Ethereum spot ETF is about to be approved

On December 22, 2023, the official website of the Hong Kong Securities Regulatory Commission announced a new The "Circular on Funds Involving Virtual Assets Recognized by the Securities and Futures Commission"replaces the "Circular on Virtual Asset Futures Exchange-Traded Funds" issued on October 31, 2022.

The circular states:The Hong Kong Securities and Futures Commission is ready to accept applications for virtual asset spot ETFs. For virtual assets (such as Bitcoin, Ethereum) that are allowed to be traded on licensed trading platforms, licensed institutions can issue and manage corresponding spot ETFs, and trade them on licensed trading platforms or recognized Financial institutions subscribe and redeem in kind and in cash.

On the same day, the official website of the Hong Kong Securities and Futures Commission released a new version of the "Joint Circular on Virtual Asset-related Activities of Intermediaries". SupersedesJoint Circular on Virtual Asset Related Activities of Intermediaries of 20 October 2023.

The circular clearly states:The China Securities Regulatory Commission has recognized virtual asset futures ETFs and is ready to accept other products including virtual asset spot exchange-traded funds and virtual asset spot ETFs. Application for recognition of funds involving virtual assets. In response to the above-mentioned latest market developments, the regulatory authorities have updated the relevant policies, including: clearly setting out the requirements applicable to intermediaries when distributing virtual asset-related products, and setting out the requirements for intermediaries to distribute virtual asset products authorized by the SFC. standards of conduct that should be met when investing in asset funds.

The legality of virtual assets including Bitcoin and Ethereum has always been the biggest concern for large traditional financial funds. Introducing traditional capital into the virtual asset market in a compliant manner has become the most feasible method to introduce capital and open up the incremental market. In 2023, just the possibility of the U.S. SEC approving a Bitcoin spot ETF has already brought about a huge global market response, bringing the bull market back to a market that has been dormant for 2 years; this time, Hong Kong is moving at the fastest speed Keep up with the pace of the United States.

On January 10, 2024, Livio Weng, chief operating officer of HashKey Group, revealed in an exclusive interview with Caixin that as of January 10, about ten Several fund companies are preparing to launch virtual asset spot ETFs in Hong Kong, and seven or eight of them are already in the actual advancement stage. The preparation phase has ended, and Hong Kong is becoming the first market in Asia to allow the listing of virtual asset spot ETFs.

For relevant content of the circular, please refer to: SFC new regulations have been introduced, and the Hong Kong Bitcoin/Ethereum spot ETF will soon be approved!

New legislation on stablecoins is coming

2023 1 On March 31, the Monetary Authority summarized the stablecoin discussion document released in 2022. Respondents generally supported the risk-based and flexible approach to supervising stablecoins.

On December 27, 2023, the Financial Services and the Treasury Bureau (Treasury Bureau) of Hong Kong and the Hong Kong Monetary Authority (HKMA) jointly issued Public consultation documentGathering views on legislative proposals for the regulation of stablecoin issuers. Another core piece of the puzzle for virtual asset market supervision is expected to be implemented in 2024.

The consultation document covers the latest measures and legislative suggestions from the Hong Kong government on the supervision of stablecoin issuance, including:The scope of stablecoin supervision, legislative methods, regulatory framework for fiat-currency stablecoin issuers, and the legal-currency stablecoin regulations. Escrow and purchasing services, regulatory rights, violation regulations and sanctions, appeals, and transitional measures. Collect opinions from all aspects of the SAR to promote the implementation of stable currency regulatory legislation.

The document highlights that the Hong Kong government proposesto introduce new legislation to implement a licensing system for fiat currency stablecoin issuers. Elements that must be met include: Defining fiat stablecoins as cryptographically protected digital forms of value that claim or appear to maintain a relatively stable value with a single or multiple fiat currencies and have other relevant characteristics; and require all Issuers that issue fiat-tender stablecoins in Hong Kong, issue issues that claim or appear to be Hong Kong dollar stablecoins, or actively promote their fiat-tender stablecoins to the Hong Kong public obtain a license from the Monetary Authority. The relevant licensing criteria and conditions are explained in detail in the document.

Stablecoins have always been one of the most profitable businesses in the encryption industry, and are also a means of grasping the lifeblood of the virtual asset industry. Tether’s revenue of US$1.5 billion in the first quarter of 2023, and its market value that is still rising and breaking new highs repeatedly, have proven to the global market that a prosperous virtual asset market cannot be separated from the cornerstone of stablecoins. The dominance of U.S. dollar stablecoins needs to be broken. In 2024, we look forward to Hong Kong implementing the Stablecoin Supervision Act. We also look forward to the achievements of Yuanbi, Hashkey, Zhongan Bank and other institutions to consolidate the Hong Kong stablecoin market.

For the complete content of the consultation document, please refer to: New stable currency legislation is coming! A look at the legislative proposals of the Hong Kong Treasury Bureau & Monetary Authority

Hong Kong 2024: The East is about to dawn, time is waiting to be released

< p style="text-align: left;">For the Hong Kong virtual asset market, 2023 is full of hope. The Hong Kong government has taken the lead in consulting and communicating with various institutions, and has created the most favorable virtual asset regulatory policy in the world with a uniquely positive attitude; those who will take over in 2024 will be institutions and teams from all parties, which need more technological and business innovation. Create more market value.

Hong Kong, the Pearl of the Orient, has been rising; what awaits us will be more extraordinary and glorious chapters.