Hong Kong releases Policy Declaration 2.0 to create a global digital asset innovation center.

On June 26, news came that the Hong Kong SAR government issued the "Hong Kong Digital Asset Development Policy Declaration 2.0" (referred to as "Policy Declaration 2.0"), reiterating the government's commitment to making Hong Kong a global innovation hub in the digital asset field.
The "Policy Declaration 2.0" proposes the "LEAP" framework, which includes optimizing legal and regulatory (Legal and regulatory streamlining), expanding the suite of tokenised products (Expanding the suite of tokenised products), advancing use cases and cross-sectoral collaboration (Advancing use cases and cross-sectoral collaboration), and people and partnership development (People and partnership development), among others.
The content of "Optimizing Laws and Regulations" shows that the Hong Kong 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 "Policy Declaration 2.0" clarifies that the Hong Kong Securities and Futures Commission is the main regulatory body for digital asset trading service providers, responsible for licensing and registration matters, setting standards, optimizing regulatory processes, and reducing potential regulatory arbitrage under different digital asset regulatory frameworks; the Hong Kong Monetary Authority will act as the front-line regulator for banks, supervising their digital asset trading activities.
In the section on "Promoting Application Scenarios and Cross-Industry Cooperation," the "Policy Declaration 2.0" supports stablecoins and other tokenized projects, including exploring the use of stablecoins as a payment tool.
The "Policy Declaration 2.0" points out that stablecoins provide a cost-effective alternative outside of traditional systems, with the potential to revolutionize payments, supply chain management, and capital market activities. The Hong Kong government will implement a regulatory framework for stablecoin issuers starting from August 1, 2025, establishing relevant requirements for reserve asset management, stabilization mechanisms, redemption processes, and prudent risk management.
The "Policy Declaration 2.0" shows that many enterprises involved in cross-border trade and settlement are expressing strong interest in using stablecoins to reduce costs and expedite transaction processes. To fully harness the potential of stablecoins, the government and regulatory agencies will provide a favorable market environment and necessary regulatory guidance to promote research and implementation plans by licensed stablecoin issuers in Hong Kong to address substantial pain points in economic activities. The Hong Kong government welcomes market participants to propose suggestions on how to experiment with and use licensed stablecoins, such as improving the efficiency of government payments.
In addition, the Cyberport will launch a pilot funding scheme for blockchain and digital assets to provide funding for application projects with future application potential, iconic status, and market influence.
The following is the full text of "Policy Declaration 2.0":
Hong Kong Digital Asset Development Policy Declaration 2.0
Vision: Build a trusted and innovative digital asset center.
The Hong Kong Special Administrative Region government is committed to building Hong Kong into a global leading digital asset center—one that fosters innovation in a controlled risk environment and brings substantial benefits to the real economy and financial markets, making it a trustworthy market.
The "Hong Kong Digital Asset Development Policy Declaration 2.0" ("Policy Declaration 2.0") published by the Financial Services and the Treasury Bureau ("FSTB") is a proactive response from Hong Kong to the ongoing evolution of the global digital asset market. Adhering to the principle of "same business, same risk, same rules," the "Policy Declaration 2.0" aims to outline forward-looking strategies to empower industry development, promote inclusive finance, cultivate talent, while safeguarding investors and maintaining financial security, thereby consolidating Hong Kong's leading position as an international financial center.
"LEAP": A step towards forming a trustworthy, sustainable, and deeply integrated digital asset ecosystem in the real economy.
Building on the initiatives proposed in the first "Policy Declaration" issued in October 2022, including establishing robust regulation, launching digital asset exchange-traded funds ("ETFs") and other innovative products, expanding investor channels through allowing retail participation, and initiating pilot projects for green bond tokenization, Hong Kong is now ready to move towards forming a trustworthy, sustainable, and deeply integrated digital asset ecosystem within the real economy, referred to as "LEAP". The Securities and Futures Commission ("SFC") previously announced the "ASPIRe" roadmap, aimed at guiding the Hong Kong digital asset ecosystem towards the future in an ever-changing environment, implementing a series of measures such as adaptive compliance and product frameworks (like derivatives trading), to achieve a balance between investor protection and market competitiveness. The "Policy Declaration 2.0" outlines the next phase of development, focusing on enhancing liquidity in digital asset trading and promoting a more diversified supply of digital asset products, to strengthen Hong Kong's position as a global digital asset hub. The government and regulatory bodies also welcome quality digital asset service providers from around the world to participate in the market, to promote liquidity and healthy orderly competition.
To achieve this vision and goal of creating a digital asset ecosystem that is deeply integrated with the real economy and financial markets, and oriented towards the future, we propose a series of strategic policy directions and will implement corresponding measures. In formulating policy directions and measures, we strive to ensure that they are not limited by current technologies and can adapt to the future development of digital assets, while integrating with the real economy and financial systems to achieve sustainable growth. These measures are framed by "LEAP": ("L"egal and regulatory streamlining) optimizing legal and regulatory processes, ("E"xpanding the suite of tokenised products) expanding the variety of tokenised products, ("A"dvancing use cases and cross-sectoral collaboration) advancing application scenarios and cross-departmental collaboration, and ("P"eople and partnership development) talent and partnership development, in order to build a trustworthy, innovative, and vibrant digital asset ecosystem that reinforces Hong Kong's leading position in the global financial landscape.
(“L”egal and regulatory streamlining) Optimize legal and regulatory
(a) A unified and comprehensive regulatory framework
Building on the progress made since 2022, the government will continue to work with regulators and industry stakeholders to develop a comprehensive legal and regulatory framework governing digital assets, ensuring the sustainable and responsible development of Hong Kong's digital asset ecosystem. This system covers digital asset exchanges, stablecoin issuers, digital asset trading service providers, and digital asset custodial service providers, with a focus on investor and consumer protection. The next key measure is to conduct public consultations on the licensing mechanism for digital asset trading service providers and digital asset custodial service providers to meet investors' needs for high liquidity, large-scale transactions, and secure custodial assets. The government proposes to designate the Securities and Futures Commission as the principal regulator for digital asset trading service providers, responsible for licensing and registration matters, setting standards, optimizing regulatory processes, and reducing potential regulatory arbitrage under different digital asset regulatory frameworks. The Hong Kong Monetary Authority ("HKMA") will act as the frontline regulator for banks, overseeing their digital asset trading activities.
Similarly, the Securities Regulatory Commission will serve as the primary regulatory authority for digital asset custody service providers, responsible for licensing and registration, as well as setting standards, while the Monetary Authority will act as the frontline regulatory body for banks, overseeing their digital asset custody activities.
This unified and comprehensive regulatory framework will enhance market credibility, promote broader digital asset activities and large transactions, and provide clear guidance for market participants. This arrangement will also support effective risk management and provide liquidity, ensuring the establishment of a balanced ecosystem to promote market innovation and protect investors. Regular reviews will be conducted and close communication with stakeholders will be maintained to ensure the framework adapts to technological and market developments.
At the same time, Hong Kong will continue to implement international standards related to digital assets, including the International Organization of Securities Commissions' "Policy Recommendations on Crypto and Digital Asset Markets", the Financial Stability Board's "Global Regulatory Framework for Crypto Asset Activities", the Basel Committee on Banking Supervision's "Prudential Treatment of Crypto Asset Risks", and the Organization for Economic Cooperation and Development's "Crypto Asset Reporting Framework" to promote tax transparency.
(b) Review of Tokenized Laws and Regulations
The tokenization of real-world assets and financial instruments presents an opportunity to integrate new technologies with traditional finance, potentially driving innovation in economic activities and financial market structures, thereby enhancing efficiency, reducing costs, increasing transparency, and promoting investor participation. To fully realize this potential, clear, explicit, and convenient legal and regulatory frameworks are essential. The Financial Services and the Treasury Bureau and the Monetary Authority will lead a review of the relevant legal and regulatory frameworks, referencing international experiences and practices, to promote the further application of tokenization in Hong Kong. The initial focus of the review will be on the bond market, which has already passed the proof-of-concept stage, and it is also expected to provide references for the tokenization of other real-world assets and financial instruments. A comprehensive examination of the issuance and trading processes for tokenized bonds will be conducted, including, but not limited to, settlement, registration, and record-keeping requirements. During the review process, the government will collaborate with legal experts and industry stakeholders to ensure that the review results and related improvement suggestions are practical and can meet future development needs, positioning Hong Kong as a pioneer in this innovative field.
("E"xpanding the suite of tokenised products) Expanding the variety of tokenised products
(c) Regularization of Tokenized Government Bond Issuance
The government has issued tokenized green bonds twice (with a total amount of approximately HKD 6.8 billion), proactively demonstrating the benefits of tokenization. On this basis, the government will regularize the issuance of tokenized government bonds and explore different currency and maturity arrangements, as well as other innovative options. The government hopes to provide a stable and high-quality digital bond to the market through this initiative, further enhancing accessibility and attracting a broader group of investors. To further leverage the advantages of tokenization, the Treasury and Monetary Authority will continue to communicate with industry experts to understand various market perspectives, including the incorporation of digital currencies to enhance trading efficiency, secondary market trading applications, and further expanding investor participation in the local bond market. The government aims to set a global benchmark by being the first to issue tokenized bonds and regularizing them, thereby enhancing market confidence in this technology while encouraging adoption by both the public and private sectors.
(d) Provide incentives for the tokenization of real-world assets and financial assets.
The tokenization of real-world assets and financial market instruments can enhance the efficiency, accessibility, and potential liquidity of the Hong Kong market. Through the Monetary Authority's Ensemble project (with the Securities and Futures Commission as a major partner, jointly leading the participation of the asset management industry), innovative application scenarios are actively encouraged, including the tokenization of traditional financial products (such as money market funds and other funds) as well as the revenue streams of real-world assets (such as electric vehicle charging stations). The Monetary Authority is exploring the establishment of Ensemble infrastructure to facilitate the settlement of interbank tokenized deposits, aiming to simplify processes and enhance liquidity.
The London Metal Exchange (LME) has included Hong Kong as a licensed delivery location within its global warehouse network and has approved warehouse operators in Hong Kong to store metals registered with the LME. To further develop the commodity trading ecosystem, the government encourages the market to apply tokenization and physical asset tracking technology in storage plans. Token creation technology can serve as an identification label for global warehouses, assisting in tracking metal assets and related data such as their sustainability, promoting Hong Kong's further integration into the global warehouse network.
The government will intensify efforts to expand tokenization schemes, promoting a broader tokenization of assets and financial instruments, demonstrating the diverse applications of this technology across different sectors, including precious metals (such as gold), non-ferrous metals, and renewable energy (such as solar panels).
Currently, all exchange-traded funds (ETFs) listed on the Hong Kong Stock Exchange are exempt from stamp duty when transferred. To promote the development of the tokenized market, the government will clarify that this exemption from stamp duty also applies to tokenized ETFs. Based on this exemption, the government welcomes market participants to explore the advantages of tokenizing ETFs, such as money market ETFs, including introducing them for secondary market trading on licensed digital asset trading platforms or other platforms. Looking ahead, the government will maintain an open attitude and consider factors such as fiscal impact and market development when reviewing the tax arrangements for the transfer of other SFC-recognized funds through tokenization.
The government will submit legislative proposals to include specified digital assets in qualifying transactions for private offerings of funds and family investment control tools that can enjoy profit tax exemptions. If the proposal is approved by the Legislative Council, the tax exemption will take effect from the 2025/2026 taxation year.
(“A”dvancing use cases and cross-sectoral collaboration) Promoting application scenarios and cross-departmental cooperation
(e) Supports stablecoins and other tokenized projects, including exploring the use of stablecoins as payment tools.
Stablecoins provide a cost-effective alternative outside of traditional systems, with the potential to revolutionize payments, supply chain management, and capital market activities. The government will implement a regulatory framework for stablecoin issuers starting August 1, 2025. This framework sets out proper requirements for reserve asset management, stabilization mechanisms, redemption processes, and prudent risk management, serving as the cornerstone for achieving the aforementioned vision. These regulatory requirements help ensure the stability and credibility of stablecoin issuance, enhancing its reliability for use both locally and internationally. Many businesses engaged in cross-border trade and settlement have expressed strong interest in using stablecoins to reduce costs and accelerate transaction processes. To fully leverage the potential of stablecoins, the government and regulatory bodies will provide a favorable market environment and necessary regulatory guidance, promoting research and implementation of licensed stablecoin issuers in Hong Kong across different application scenarios to address substantial pain points in economic activities. To demonstrate government support and take a leading role, market participants are encouraged to suggest how the government can experiment with and utilize licensed stablecoins, for instance, to enhance the efficiency of government payments.
(f) Promote cooperation among regulatory agencies, law enforcement agencies, and technology providers.
As a digital technology incubator in Hong Kong, Cyberport has been actively supporting tokenization projects in Hong Kong and has created a thriving environment for startups to explore innovative fintech solutions through collaboration with the Monetary Authority on the Ensemble project. To further support the development of tokenization projects, Cyberport will collaborate with relevant stakeholders in the digital asset industry, leveraging its incubation ecosystem to provide support, including business matching opportunities, technical assistance, industry expert guidance, and participation in accelerator programs related to digital assets and Web3. Startups and companies engaged in tokenization solutions will benefit from specialized resources that enable them to experiment with innovative ideas and commercialize them. Cyberport will also launch a blockchain and digital asset pilot funding program to provide funding for applications with future application potential, iconic status, and market impact. In addition to funding, Cyberport will assist these companies and coordinate with relevant stakeholders to support the implementation of pilot projects as needed.
The dedicated team of the Government Investment Promotion Agency welcomes and is ready to provide support.