Understanding the "Hong Kong Digital Asset Development Policy Declaration 2.0" in one article

The Hong Kong government released the Declaration on Digital Asset Development Policy 2.0 (Declaration 2.0), marking a strategic upgrade in the field of digital assets in Hong Kong. (Summary: Full interpretation of Hong Kong's Stablecoin Ordinance: from definition, regulatory framework, eligibility to market impact) (Background supplement: Hong Kong's Stablecoin Law came into effect on 8/1, HKMA Chief Executive Raymond Yue: Stablecoins are not speculative tools, and the three major thresholds constitute the moat of Hong Kong dollars) On the basis of continuing the core concepts of supporting innovation and balanced supervision, the new declaration focuses on improving the liquidity of digital asset trading and promoting more diversified digital asset products 1. On June 26, 2025, the Hong Kong government released the Declaration on Digital Asset Development Policy 2.0 (Declaration 2.0), marking a strategic upgrade in the field of digital assets to further consolidate its competitiveness as a global digital financial hub. Building on the core concepts of supporting innovation and balancing regulation, the new declaration focuses on enhancing the liquidity of digital asset trading and promoting a more diversified supply of digital asset products, so as to strengthen Hong Kong's position as a global digital asset hub. The Declaration 2.0 uses "LEAP" as a framework and corresponds to optimizing legal and regulatory streamlining, expanding the suite of tokenised products, and advancing use cases and cross-sectoral collaboration), and People and partnership development, which aims to create an innovative and dynamic, sustainable and deeply integrated digital asset ecosystem into the real economy, strengthening Hong Kong's leading position in the global financial landscape. 2. Key Points 2.1 Review of the First Policy Declaration On 31 October 2022, the Government of the Hong Kong Special Administrative Region issued the Policy Declaration on the Development of Virtual Assets in Hong Kong, clarifying that the government and regulators will formulate a regulatory framework for virtual assets based on the principle of "same business, same risks, and same rules", and will promote the establishment of a licensing system for virtual asset service providers and a regulatory regime for stablecoins for payment purposes. At the same time, it expressed its openness to discussing the property rights of tokenized assets and the legality of smart contracts in the future; A pilot scheme will also be launched to tokenize the issuance of government green bonds for subscription by institutional investors. 2.2 Overview of existing regulatory and tax policies Hong Kong has not yet developed an independent regulatory framework specifically for digital assets. Since 2017, the SFC has regulated "security-based" tokens, including licensing requirements for trading platforms, "virtual asset" portfolio managers and funds, with the aim of ensuring compliance with the existing Securities and Futures Ordinance (SFO). For over-the-counter transactions (OTC), you need to apply for a Money Service Operator (MSO) license from the Customs and Excise Department. On May 21, 2025, the Stablecoin Ordinance was officially passed, establishing a regulatory framework for stablecoins for the first time. The tax behavior of digital assets mainly applies to the Departmental Interpretation and Practice Notes (DIPN) No. 39 updated by the Hong Kong Inland Revenue Department in 2020, which adds relevant content on how digital assets are taxed. DPIN 39 divides digital tokens into payment tokens, security tokens and utility tokens. In accordance with Circular DPIN 39 and Hong Kong's general tax rules, profits tax on digital tokens depends on their nature and purpose. The tax treatment of proceeds from an initial coin offering (ICO) usually follows the properties of the tokens issued, i.e. it is the nature of the token's rights and obligations that determines the tax treatment, not the form of the token offering. At the same time, profits tax is not levied on profits arising from the sale of capital assets. If digital assets are purchased for long-term investment purposes, profits from the disposal of these assets are also not subject to profits tax. However, profits derived from cryptocurrency business activities (including cryptocurrency trading, cryptocurrency exchange, mining, etc.) and generated in Hong Kong shall be subject to profits tax. For employment income collected in the form of cryptocurrency, salaries tax applies. 2.3 Interpretation of the main points of the declaration On the basis of the first policy declaration, the Hong Kong government has further launched the Declaration 2.0, demonstrating its determination to seek a fine balance between risk prevention and encouraging innovation, and to enhance its position in the digital asset field. A series of initiatives within the LEAP framework are at the heart of the Declaration 2.0. In terms of legal and regulatory enhancement, the Hong Kong government is building a unified and comprehensive regulatory framework covering digital asset trading platforms, stablecoin issuers, digital asset trading service providers and digital asset custodian service providers, with the core objective of protecting investors and consumers. The Hong Kong government has not set up a special digital asset supervision department, but has tried to integrate digital assets into Hong Kong's existing regulatory system, clarify the chain of responsibility and jurisdiction, and avoid overlapping supervision. The Government proposes to designate the SFC as the main regulator for digital asset trading service providers, responsible for licensing and registration, setting standards, optimising the regulatory process and mitigating potential regulatory arbitrage under different digital asset regulatory frameworks. The Hong Kong Monetary Authority (HKMA) will act as the bank's frontline regulator, overseeing its digital asset trading activities. Similarly, the SFC will act as the primary regulator for digital asset custodian service providers, responsible for licensing and registration, as well as setting relevant standards, while the HKMA will act as the bank's frontline regulator, overseeing its digital asset custody activities. In addition, the Financial Services and the Treasury Bureau (the specific issuing body of the Policy Declaration, which is mainly responsible for financial and treasury affairs in Hong Kong, including the formulation of policies and legislative proposals related to the development of Hong Kong's financial market, and the management of assets, expenditures and revenues of the Hong Kong Government) and the HKMA will lead the legal and regulatory framework for tokenization, with reference to international experience and practice, with reference to international experience and practice, with a view to facilitating the further application of tokenization in Hong Kong. In terms of expanding the types of tokenized products in the suite, the Hong Kong government will regularize the issuance of tokenized government bonds and explore different currency and maturity arrangements. To further leverage the advantages of tokenization, the FSTB and HKMA will continue to communicate with industry experts to understand the views of different aspects of the market, including the inclusion of digital currencies to enhance trading efficiency, secondary market trading application scenarios, and further expanding investors' participation in the local bond market. In addition, the Hong Kong government will provide incentives for the tokenization of real-world assets and financial assets to improve market efficiency, accessibility and liquidity. Encourage innovative use cases, including tokenisation of traditional financial products (such as money market funds and other funds) and income streams from real-world assets, through the HKMA's Ensemble project, which aims to explore innovative financial market infrastructures built on blockchain platforms to facilitate seamless interbank settlement in tokenized currencies with wholesale level central bank digital currencies (wCBDCs). It also explores the establishment of an Ensemble infrastructure to facilitate the settlement of tokenized deposits between banks to streamline the process and provide ...