Hong Kong moves toward becoming digital currency hub, financial secretary says

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Hong Kong’s plans to occupy a leading role in the digital asset industry have received a positive push in recent weeks despite the chaos rocking the markets.

The region’s Financial Secretary Paul Chan confirmed in a speech at the POWER Hong Kong Web 3 Innovators Summit that several firms had expressed keen interest in setting up offices in the city. While Chan did not disclose the names of the interested entities, he noted that they were lured by the number of policies initiated by the government.

Chan said under the policies of “grabbing enterprise” and “grabbing talents,” the government is actively reducing the tax burden on fintech and digital asset firms interested in setting up shop in Hong Kong. The Financial Secretary claimed that the city’s status as an “international financial center” and existing regulatory framework puts it ahead of the pack.

“We also welcome global financial technology and virtual asset communities and talents to develop in Hong Kong, and join us in embracing the huge opportunities brought about by the development of Web3 and the virtual asset industry,” said Chan.

In 2022, authorities published the “Policy Declaration on the Development of Virtual Assets in Hong Kong,” which Chan describes as a clear statement of intent that the city is keen on innovating in the digital asset space. Chan said Hong Kong had earned the title of “best foothold for high-quality virtual assets companies” in the wake of implosions rocking the industry.

Despite the plans to attract international firms, Hong Kong’s regulators have stated that digital currency operators will be regulated similarly to traditional finance institutions. Under the new regime of rules, virtual asset service providers must comply with extant provisions on anti-terrorism financing, anti-money laundering, and all investor protection rules.

Last month, two exchange-traded funds (ETFs) linked to digital assets made their debut on the Hong Kong Stock Exchange while the Legislative Council of Hong Kong amended a bill seeking to introduce a new licensing regime for industry firms.

Hong Kong’s regulators are juggling multiple balls

Hong Kong’s regulators have been engaged in a trove of pilots relating to digital assets in the last 12 months. At the top of their concerns lie the country’s central bank digital currency (CBDC), which has received significant attention recently.

The Hong Kong Monetary Authority (HKMA) participated in a Bank for International Settlement trial to explore the use of CBDCs for cross-border transactions. Other projects of interest for regulators include the tokenization of securities and green bonds for subscription by institutional investors.

“Although these projects are small steps, they also demonstrate our commitment and determination to explore financial innovation with the global virtual asset community,” said Chan.

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