Hong Kong competes as a global virtual asset trading center to secure its position as a financial center

Author: Digital Economy Research and Development Center

[Editor's Note] The Hong Kong Special Administrative Region Government stated that it will become a global virtual asset trading center in 2022. On October 31, it officially released the "Policy Declaration on the Development of Virtual Assets in Hong Kong", which clarified that the Hong Kong District Government is committed to developing a dynamic virtual asset trading center. and industry ecosystem policy positions and guidelines. Hong Kong's global virtual asset trading center has high-quality financial development and an open financial market, which has established the core positioning of Hong Kong as an international financial center in the country's "14th Five-Year" digital economy plan, and has also assumed the important role of integrating into the global development of the country's digital economy. mission.

1. The virtual asset trading center has become an important "breaking point" for Hong Kong to strengthen its international financial center

As the concept and technology of the metaverse lead to a global upsurge, the top-level design of governments in various parts of the mainland and industry application scenarios are gradually implemented. The future opportunities brought by virtual assets entering Web3.0 cannot be ignored, and the virtual asset market has become indispensable. , This is not only an important step for Hong Kong to consolidate and strengthen the international financial center, but also an important economic ecosystem integrated into the country's digital economy and Metaverse/Web3.0 development.

As early as 2019, Hong Kong has been given a corresponding role in the national digital economy development pattern. In the "Guangdong-Hong Kong-Macao Greater Bay Area Development Plan" issued by the State Council, it is clearly proposed to support Hong Kong in building an international financial center, give play to Hong Kong's leading role in the financial field, consolidate and enhance Hong Kong's status as an international financial center, and promote financial development to high-end and high-value-added To develop in the same direction, it will unite the two national-level regional financial centers of Guangzhou and Shenzhen to support the Guangdong-Hong Kong-Macao Greater Bay Area to become an international financial hub. In 2021, the country's "14th Five-Year Plan" further proposed to support Hong Kong's promotion of its status as an international financial center and strengthen its functions as an international asset management center and risk management center.

Virtual assets are currently very attractive to global financial innovators and investors. As an international financial center, Hong Kong has always been an international financial center with world-class financial infrastructure, legal and regulatory systems. It has an open and inclusive attitude towards global innovators engaged in virtual asset business. It also appreciates and encourages innovators to carry out distributed classification. In the field of ledger technology (DLT), and develop new financial innovation solutions that are more cost-effective, inclusive, flexible and epoch-making. At the same time, actively promote the sustainable development of various financial services in the entire virtual asset value chain, covering virtual asset issuance, tokenization, trading and payment platforms, financial and asset management, and depository, etc. To this end, the Hong Kong government is cooperating with financial regulatory agencies, focusing on the improvement of laws, regulations and regulatory systems, fully considering the continuous evolution and innovation of virtual assets, maintaining the sustainability of the industry, and creating a more convenient and safer environment for the development of the industry. ecosystem.

Second, the Hong Kong government is making steady progress in terms of policy guidelines and regulatory mechanisms, and has achieved phased milestones

The government and regulators have studied and launched three pilot programs (Fintech Week NFT, Green Bond Token, Cyber Hong Kong Dollar) to test the technical benefits of virtual assets and try to further apply the technology to the financial market. In February this year, under the government green bond program, a tokenized green bond of HK$800 million was successfully sold, which is the world's first tokenized green bond issued by the government. This successful issuance marks a milestone in Hong Kong's strengths in combining the bond market, green and sustainable finance, and fintech. In addition, the meaning and positioning of the "digital Hong Kong dollar" and the "digital renminbi" being promoted at the national level are different. "Digital RMB" is a legal currency in digital form issued by the People's Bank of China, and "Digital Hong Kong Dollar" is the "backbone" and pillar with the characteristics of a stable currency connecting legal currency and virtual assets. The Manifesto states that stablecoins are “a medium of exchange for cryptocurrencies and fiat currencies.”

The Hong Kong government and regulatory agencies have always adopted "same business, same risk, and same rules" as the regulatory principle, and have formulated a comprehensive virtual asset regulatory framework, covering virtual asset funds and discretionary account management, and distribution of virtual asset-related products , virtual asset transactions, etc. As far as the scope of supervision is concerned, there is an international consensus, and it is necessary to formulate appropriate supervision in terms of governance, stability and redemption mechanisms for different fields of stablecoins. Through the solicitation of the preliminary opinion draft, the Hong Kong Monetary Authority received 58 submissions from well-known institutions in the industry, and released the "Summary of the Discussion Document on Encrypted Assets and Stablecoins" on January 31, 2023, clearly suggesting that it will be related to stablecoins. Some of the activities included in the regulation support a risk-based and flexible approach to the regulation of stablecoins, and are expected to be implemented in 2023-2024. Judging from the specific regulatory requirements of the "Summary", it will be based on a comprehensive regulatory framework, including but not limited to ownership, governance and management, financial resource requirements, risk management, anti-money laundering and anti-terrorist financing, user protection, regular audit and disclosure requirements, etc. Develop appropriate regulatory requirements in the field.

In order to further implement a comprehensive regulatory framework, the Hong Kong government is committed to establishing a licensing system for virtual asset service providers. In February this year, the Hong Kong Securities Regulatory Commission announced that it would openly solicit opinions from the market on the proposed regulations for operators of virtual asset trading platforms, focusing on "whether licensed platform operators should be allowed to provide services to retail investors" and "how to protect investors" Two items. The goal is to allow retail trading under the new licensing regime for cryptocurrency exchanges on June 1. A spokesman for the Securities Regulatory Commission said that the two digital assets "Bitcoin" and "Ethereum" will most likely be listed on the Hong Kong trading platform. Currently, the Hong Kong Securities Regulatory Commission is piloting cryptocurrency trading, which only allows professional investors with about HK$8 million in bank assets to participate. After the promulgation of the rules, it will be gradually opened to other retail investors under certain conditions. At that point, however, individual investors will only be able to deal with “highly liquid” cryptocurrencies.

**3. **Hong Kong Global Virtual Asset Trading Center is of great significance to the global development of the country's digital economy

Hong Kong's competition as a global virtual asset center will directly help enhance Hong Kong's international status, drive the development of the financial service industry, strengthen its status as an international financial center, attract more international capital, promote financial innovation and financial technology, and increase high-quality employment opportunities. Looking back, we have to admit that compared with Singapore, Hong Kong, China is half a position behind in terms of Web 3.0 policies and actions. However, Hong Kong's overall financial background is strong, and it is still the most important financial center in Asia and even in the world. This is due to the strength of Hong Kong's traditional financial industry, its active embrace of new financial formats, its strong entrepreneurial atmosphere, more professional financial services, and its more complete financial regulatory system. Of course, behind this are the advantages of the country's top-level design, the far-reaching layout of the country's digital economy globalization, and the strong support formed by the important positioning of the overall international financial hub of the Guangdong-Hong Kong-Macao Greater Bay Area.

Therefore, we believe that on such an epoch-making innovative financial topic as virtual asset trading, Hong Kong does not pursue "running fast", but "runs steadily", adhering to the cognitive concept of "openness, compatibility, and win-win", Ensure high-quality, high-value-added promotion of sustainable development of financial services, financial technology, and innovative finance, enhance Hong Kong's status as an international financial center, and consolidate the national digital economy globalization and the important strategy of "One Belt, One Road".