New Trends in Hong Kong's Digital Asset Development Policy: Deep Transformation from Virtual Assets to Digital Assets

On June 26, 2025, the Government of the Hong Kong Special Administrative Region released the "Hong Kong Digital Asset Development Policy Declaration 2.0" (hereinafter referred to as "Policy Declaration 2.0"). This policy document aims to transform Hong Kong into a global innovation center for digital assets by updating and improving existing policies and regulatory frameworks to adapt to the rapid development of the digital asset industry.

The Financial Secretary, Paul Chan, stated that the "Policy Declaration 2.0" demonstrates the HKSAR government's vision for the development of digital assets, showcasing the practical applications of tokenization and promoting the diversification of application scenarios. By combining prudent regulation with encouragement for market innovation, the government hopes to build a more vibrant digital asset ecosystem that integrates with the real economy and social life, bringing benefits to the economy and society while reinforcing Hong Kong's leading position as an international financial center.

From "Virtual Asset 1.0" to "Digital Asset 2.0"

The "Policy Declaration 2.0" is a further upgrade based on the "Policy Declaration on the Development of Virtual Assets in Hong Kong" (referred to as "Policy Declaration 1.0"), which was released in 2022. "Policy Declaration 1.0" outlines the policy stance and guidelines established by the Hong Kong SAR government to develop a vibrant virtual asset industry and ecosystem.

Compared to "Policy Declaration 1.0", "Policy Declaration 2.0" has made improvements in the following aspects:

1. Target Continuity
2. Deepening Regulation
3. Key Expansion
4. Scene Expansion
5. Terminology Shift: From "Virtual Assets" to "Digital Assets"
6. Increase tax incentives

It is noteworthy that the "Policy Declaration 2.0" upgrades stablecoins from "tool-type currency" to "infrastructure currency" and clearly implements a regulatory system for stablecoin issuers starting from August 1, 2025, setting requirements for reserve asset management and other aspects, making them more legally recognized and widely accepted.

In addition, the policy declaration regards the tokenization of real-world assets as a key direction for industrial development, not only promoting the normalization of bond tokenization but also planning to include more income-generating assets in the scope of tokenization, which will break the boundaries between the virtual economy and the real economy.

Four Core Pillars of the LEAP Framework

The "Policy Declaration 2.0" proposed the "LEAP" framework, which includes four core pillars:

1. Optimizing legal and regulatory streamlining
2. Expanding the suite of tokenised products
3. Advancing use cases and cross-sectoral collaboration
4. Talent and Partner Development

Optimize laws and regulations

The government is building a unified and comprehensive regulatory framework for digital asset service providers, covering digital asset trading platforms, stablecoin issuers, digital asset trading service providers, and digital asset custody service providers. The Securities and Futures Commission will serve as the main regulatory authority, responsible for the licensing mechanism for future digital asset trading service providers and digital asset custody service providers.

The Financial Services and the Treasury Bureau and the Hong Kong Monetary Authority will lead a comprehensive review of legislation to promote the tokenization of real-world assets and financial instruments. This review will thoroughly examine various processes involved in the issuance and trading of tokenized bonds, including settlement, registration, and record-keeping requirements.

expand the variety of tokenized products

The government plans to regularize the issuance of tokenized government bonds and provide incentives for the tokenization of real-world assets, including clarifying the stamp duty arrangements applicable to tokenized exchange-traded funds, to enhance liquidity and popularity. The government supports relevant tokenized exchange-traded funds to conduct secondary market trading in the future through licensed digital asset trading platforms or other platforms.

In addition, the government will promote the tokenization of a wider range of assets and financial instruments, demonstrating the diverse applications of this technology in various fields, including precious metals (such as gold), non-ferrous metals, and renewable energy (such as solar panels), among others.

Promote application scenarios and cross-industry cooperation

The licensing mechanism for stablecoin issuers will be implemented on August 1, which will help promote the development of substantial application scenarios. The government is committed to strengthening the cooperation between regulatory agencies, law enforcement agencies, and technology providers to develop digital asset infrastructure. The government welcomes market participants to propose suggestions on how to experiment with and use licensed stablecoins.

Cyberport will launch a blockchain and digital asset pilot funding program to support startups and related organizations, covering various aspects such as incubation, accelerators, marketing, artificial intelligence, and more, providing funding for applicant projects that have future application potential, are iconic, and have market influence.

Talent and Partner Development

The government is committed to collaborating with the industry and academia to promote talent development, positioning Hong Kong as an excellent center for digital asset knowledge sharing and international cooperation, including joint research programs and global regulatory collaboration. The government will establish a sustainable talent pool by nurturing a new generation of entrepreneurs, researchers, and technical experts.

Key Interpretation of "Policy Declaration 2.0"

1. Unified and comprehensive regulatory framework: covering digital asset exchanges, stablecoin issuance, digital asset trading service providers, and digital asset custodians.

2. Tokenization Legal and Regulatory Review: Develop laws for tokenization and strengthen regulatory measures, focusing on key regulatory aspects including the issuance of tokenized bonds, trading processes, settlement, registration, and record-keeping requirements.

3. Provide incentives for the tokenization of real-world assets and financial assets: Promote the construction of the digital HKD and facilitate the settlement of tokenized deposits between banks. Apply tokenization technology in areas such as commodity trading, supply chain finance, and international logistics settlement.

4. Hong Kong's first digital asset index: Aimed at becoming a reliable price benchmark for Bitcoin and Ethereum in the Asia region, consolidating Hong Kong's leading position as an international financial center.

5. The Ministry of Finance and the Securities Regulatory Commission provide consulting services: offering advice on digital asset trading service providers and digital asset custody service providers to make the operation of digital assets smoother.

The "Policy Declaration 2.0" aims to attract more participants, including traditional asset holders, investors, as well as players and speculators, based on a balance of interests among all parties. By standardizing the key processes of the entire chain from the issuance, circulation to the exit of digital assets, it ensures safety and reliability and implements license management, providing participants with a stable operating environment.

If the "Policy Declaration 2.0" can be properly implemented, the digital asset ecosystem in Hong Kong will basically take shape. If the practice is successful, the cryptocurrency financial market and funds will achieve a high degree of integration, further consolidating Hong Kong's position as an international financial center.