Review of the Development of Virtual Assets in Hong Kong in 2024

April: The First Batch of Spot Virtual Asset ETFs Approved

The Asian market has launched spot virtual asset ETF products for the first time. The Hong Kong Securities and Futures Commission officially announced the list of approved virtual asset spot ETFs, which includes related products from several well-known asset management companies. This move is not only an important milestone for the Hong Kong virtual asset market but also marks the first-ever launch of a spot ETF product for Ether on a global scale.

June: License Application Turmoil

In May 2023, regulatory authorities released relevant regulations for the licensing system of virtual asset trading platforms, requiring virtual asset exchanges operating in Hong Kong to obtain licenses within a one-year transition period. As the deadline at the end of May 2024 approaches, several platforms are actively submitting applications. However, some mainstream trading platforms have chosen to withdraw their compliance licensing applications in Hong Kong, sparking discussions in the market about the prospects of virtual assets in Hong Kong.

July: Domestic E-commerce Giants Layout in the Hong Kong Stablecoin Market

The Hong Kong Monetary Authority has announced the list of the first participating companies in the regulatory sandbox for stablecoins. Among them, a subsidiary of a well-known domestic e-commerce group has announced plans to issue a cryptocurrency stablecoin pegged to the Hong Kong dollar at a 1:1 ratio. This stablecoin will be issued based on a public blockchain, with reserves composed of highly liquid and trustworthy assets, and it commits to regular disclosure and auditing to ensure the integrity of the reserves.

August: Hong Kong Monetary Authority Promotes Development of Tokenized Market

The Hong Kong Monetary Authority has launched the Ensemble project sandbox, aimed at promoting the application of tokenization technology in the financial sector. The first phase of the trial covers four main themes: fixed income and investment funds, liquidity management, green finance, and trade supply chain financing. The Monetary Authority is collaborating with banks to prepare for cross-bank payment and currency settlement experiments and plans to work with international institutions to promote the development of global tokenization technology.

October: New Chairman of the Hong Kong Securities and Futures Commission Takes Office

The Chief Executive of the Hong Kong Special Administrative Region has appointed Dr. Huang Tianyou as the new chairman of the Hong Kong Securities and Futures Commission for a term of three years. Dr. Huang stated that he will be committed to cultivating a sustainable and vibrant capital market, while protecting investors' interests, promoting economic growth, enhancing corporate governance, and stimulating innovation.

In the same month, the Hong Kong Securities and Futures Commission issued a license to the third virtual asset trading platform. This platform focuses on securities token and physical asset tokenization services, aiming to enhance asset liquidity and create more financing and investment opportunities.

November: Launch of Virtual Asset Index Series and Launch of Bank Cryptocurrency Services

The Hong Kong Stock Exchange officially launched a series of virtual asset indices, providing transparent and reliable benchmark prices for Bitcoin and Ethereum in the Asian time zone. This index series aims to address the price discrepancies of virtual assets among global exchanges, offering investors a unified reference.

In addition, a Hong Kong digital bank announced that it has become the first bank in Asia to provide cryptocurrency trading services for retail users, supporting Bitcoin and Ethereum trading, limited to holders of Hong Kong identity cards.

December: Regulatory Framework for Stablecoins Released and New Licensed Exchanges Established

The "Stablecoin Regulation Draft" was submitted for the first reading in the Legislative Council, stipulating that the issuance of fiat stablecoins, Hong Kong dollar stablecoins, or activities promoting stablecoins to the public must obtain a license. The regulatory focus includes reserve asset management, ensuring the redemption rights of token holders, and requirements for combating money laundering.

The Hong Kong Securities and Futures Commission announced the issuance of licenses to four virtual asset trading platforms, bringing the total number of licensed platforms to seven. The Commission is accelerating the approval process and plans to establish a consultative group in early 2025 to enhance regulation of virtual asset platforms.

At the end of the year, a legislative council member proposed the introduction of "Digital Connect," allowing mainland investors to buy and sell Hong Kong-recognized digital assets through a special channel, to promote financial connectivity between the mainland and Hong Kong and to drive the development of financial innovation.