Hong Kong is forging ahead with a nuanced regulatory framework for digital assets, emphasizing a principle of "same activity, same risk, same regulation." Finance Secretary Paul Chan, speaking at a global forum in Davos, Switzerland, outlined the city's strategy to craft smart regulations that protect users while fostering innovation. This approach means companies are regulated based on the inherent risks of their activities, not the underlying technology, ensuring a level playing field whether services are delivered via apps, computers, or blockchain.
The regulatory push extends beyond licensing virtual asset trading platforms (VATPs). In partnership with the Hong Kong Monetary Authority (HKMA), the city is actively testing new applications. Key initiatives include trials of tokenized deposits, where fiat currency is converted into digital tokens for fast and secure online transfers, and the pursuit of tokenized green bond issuance. Since 2023, Hong Kong has sold approximately $2.1 billion in green bonds via digital platforms.
A significant forthcoming development is the anticipated issuance of stablecoin licenses within the next few months. This licensing regime will require issuers to meet stringent safety and transparency standards to safeguard user funds, aiming to integrate these digital currencies pegged to assets like the US dollar into the formal financial system.
Hong Kong's tokenization drive is already yielding real-world results. A notable example from October last year saw China Merchants Bank (CMB) tokenize a $3.8 billion money market fund on the BNB Chain. This effort is part of a broader, five-year initiative called DART (Digital Asset and Registered Token), encompassing over 40 projects to enhance the tokenization ecosystem for businesses and consumers.
The city's digital finance ambitions also have an international dimension. In November 2022, a pilot involving Brazilian bank Banco Inter, Chainlink, the Central Bank of Brazil, and the HKMA tested blockchain technology for improving cross-border payments and trade finance between Hong Kong and Brazil, demonstrating the potential for tokenization to streamline international settlements.
