Important Milestones in the Hong Kong Virtual Asset Market in 2024

Spot Bitcoin and Ethereum ETFs Approved

In April 2024, the Hong Kong Securities and Futures Commission officially published the approved list for virtual asset spot ETFs. This marks the first launch of such products in the Asian market, with the Ether spot ETF being among the first in the world. Several well-known asset management companies' related products have successfully been selected, opening a new chapter for the development of the virtual asset market in Hong Kong.

License Application Process

By the end of May 2024, multiple platforms actively submitted applications for the Virtual Asset Trading Platform (VATP) license to meet regulatory requirements. However, some mainstream trading platforms chose to withdraw their compliance licensing applications in Hong Kong, sparking discussions in the market about the future of virtual assets in Hong Kong. This move reflects the industry's cautious attitude towards regulatory policies and also highlights the challenges in the compliance process.

New Trends in the Stablecoin Market

On July 18, the Hong Kong Monetary Authority announced the list of participants in the stablecoin regulatory sandbox, with several well-known companies selected. Subsequently, a large technology group announced that it would issue a cryptocurrency stablecoin in Hong Kong that is pegged to the Hong Kong dollar at a 1:1 ratio. This stablecoin is issued based on a public blockchain, with reserves composed of highly liquid and trustworthy assets, and it commits to regular disclosures and audits to ensure transparency and compliance.

Promoting Financial Innovation

On August 28, the Hong Kong Monetary Authority launched the Ensemble project sandbox, aimed at promoting the application of tokenization technology in the financial sector. The first phase of the experiment covers areas such as fixed income and investment funds, liquidity management, green finance, and trade supply chain financing. The project demonstrates Hong Kong's determination to promote financial innovation and enhance its status in the global financial market.

Regulatory Agency Personnel Changes

In October, the Hong Kong SAR government appointed a new chairman of the Securities and Futures Commission for a term of three years. The new chairman stated that he will be committed to fostering a sustainable and active capital market, protecting investors' interests while promoting economic growth, enhancing corporate governance, and stimulating innovation.

Issuance of Virtual Asset Exchange Licenses

On October 4, the Hong Kong Securities and Futures Commission issued a license to the third virtual asset exchange, marking further improvements in the regulatory framework. The exchange focuses on security tokens and the tokenization of physical assets, aiming to enhance asset liquidity and create more financing and investment opportunities.

Launch of the Virtual Asset Index Series

On November 15, 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 initiative aims to address the price discrepancies of virtual assets across global exchanges and provide investors with a unified reference standard.

Expansion of Banking Services into Cryptocurrency

On November 25, a digital bank in Hong Kong announced that it has become the first bank in Asia to offer cryptocurrency trading services for retail users. The service supports trading in Bitcoin and Ethereum, allowing users to operate with Hong Kong dollars and US dollars, reflecting traditional financial institutions' proactive exploration of the virtual asset market.

Stablecoin Regulatory Framework Released

On December 18, the "Stablecoin Regulation Draft" was submitted for its first reading in the Legislative Council. The draft stipulates that activities involving the issuance of fiat stablecoins, Hong Kong dollar stablecoins, or the promotion of stablecoins to the public must obtain a license. Regulatory focuses include reserve asset management, protection of token holders' rights, and anti-money laundering requirements, among others.

The number of licensed exchanges is increasing

On December 18, the Hong Kong Securities and Futures Commission announced the addition of four licensed virtual asset trading platforms, bringing the total to seven. The Commission stated that it is accelerating the approval process and plans to establish a consultative group in early 2025 to strengthen the regulation of virtual asset platforms.

New Proposal for Cross-Border Cooperation

At the end of the year, a legislative member proposed the introduction of "Digital Connect" to explore allowing mainland investors to buy and sell Hong Kong-recognized digital assets through a special channel. This proposal aims to promote financial connectivity between the mainland and Hong Kong, facilitate financial innovation and the development of new productive forces, and reflects Hong Kong's innovative approach to exploring the development of the virtual asset market under the "One Country, Two Systems" framework.