The issuance of additional policy papers and circulars about tokenized assets, stablecoins, and cryptocurrency trading is anticipated in Hong Kong as the city persists in establishing itself as a prominent web3 hub within the Asian region.
During Hong Kong Finance Week, Christopher Hui, the Secretary for Hong Kong’s Financial Services and the Treasury, said that the government is unwavering in its dedication to encouraging web3 innovation. In addition, he highlighted that the government’s commitment in this respect has remained intact by the latest regulatory steps that have been taken against the JPEX cryptocurrency exchange.
According to Hui, there has been a consistent line of inquiry about the possible influence that JPEX may have on our unwavering determination to encourage the expansion of the web3 industry. Based on the information that is now at hand, it is possible to say without any equivocation that the response is not favorable.
Hui has informed us that the Commission on Securities and Futures plans to release circulars very soon regarding intermediaries participating in activities relating to encoded securities, as well as the issuance of tokens of SFC-authorized investment products. These plans concern both the tokenization, when possible, of SFC-authorized investment products and intermediates involved in these activities.
The regulators are currently directing their attention toward exploring possibilities to broaden their jurisdiction to encompass the acquisition and disposition of virtual assets, extending beyond transactions occurring exclusively on trading platforms, as stated by Hui.
Shortly, the Monetary Authority of Hong Kong, the Department of Financial Services, and the Treasury Bureau are expected to release a subsequent joint consultation about the regulatory framework governing stablecoin issuers, as mentioned by Hui.
Fresh Perspectives on the Tokenization Process
The executive director of the Hong Kong Monetary Authority (HKMA), Eddie Yue, stated during a recent event that use cases, such as tokenized bonds, have progressed beyond the evidence of concept phase and have successfully been implemented in actual transactions.
Yue stated that our organization actively contributed to facilitating the government’s issuance of the world’s inaugural tokenized administration green bond earlier this year. The primary objective was to showcase the harmonious alignment between Hong Kong’s legal and regulatory framework and this innovative form of bond issuance.
Yue further elaborated that ongoing discussions between the government and the industry are underway to explore potential avenues for future tokenized issuance, thereby facilitating the exploration of novel opportunities.
According to Yue, it is anticipated that there will be an increase in the practice of tokenizing disparities to facilitate the progressive implementation of tokenization. There will likely be a rise in utilizing blockchain-based payment systems, encompassing stablecoin wallets and tokenized deposits provided by financial institutions.
Emerging Dangers
The Chief Executive Officer of the Securities and Futures Commission (SFC), Julia Leung, has announced the regulator’s intention to release two circulars about tokenization shortly.
The forthcoming circular will focus on the identification of risks associated with the implementation of this novel technology, as well as the expectations of regulatory bodies regarding the due diligence process and the role of intermediaries during the sale or primary granting of said technology, as stated by Leung.
Leung further emphasized that an additional forthcoming circular will address the Securities and Futures Commission’s stipulations about issuing authorized funds. There shall be implemented supplementary measures to ensure the fulfillment of all anticipated requirements.
“The primary focus lies in ensuring the secure transfer of assets and maintaining accurate ownership records, as this technology is inherently novel,” stated Leung.
While acknowledging our support for the industry and its endeavors in exploring and expanding various use cases, it is imperative to recognize the emergence of potential risks inherent in cutting-edge technology, specifically about the transfer, ownership, and documentation of these tokens.
