Key Updates: Policies and Regulatory Developments in Hong Kong

The Government issued a policy statement on 31 October 2022 on the development of Virtual Assets (VA) in Hong Kong. The statement sets out the Government's policy stance and approach towards developing a vibrant sector and ecosystem for VA in Hong Kong. The following topics are covered in the statement:

1. Vision and approach: As an international financial centre, Hong Kong is open and inclusive towards the global community of innovators engaging in VA businesses. The Government, in conjunction with the financial regulators, are working towards providing a facilitating environment for promoting sustainable and responsible development of the VA sector in Hong Kong. We will put in place timely and necessary guardrails to mitigate actual and potential risks in line with international standards, so that VA innovations can thrive in Hong Kong in a sustainable manner.
2. Regulations: With consistency, predictability and clarity gradually established by a comprehensive regulatory framework, we have a solid foundation to further embrace financial innovations and technology development brought by the rapid development of VA globally. As we step up our preparatory work for a new licensing regime for VA Service Providers, we are ready to engage with global VA Exchanges and invite them to set foot in Hong Kong for new business opportunities.
3. Pilot projects: The Government and the regulators are exploring a number of pilot projects to test the technological benefits brought by VA and their further applications in the financial markets. These projects include non-fungible token (NFT) issuance for Hong Kong Fintech Week 2022, Green bond tokenisation, and e-HKD.
4. Way forward: The vision presented in the policy statement will be achieved by facilitating policies, comprehensive and balanced regulations, risk-based guardrails, as well as our pilot projects. The Government sincerely invites the global VA community to join hands with us and leverage on Hong Kong's status as an international financial centre to realise the potential of financial innovations under a clear, agile and facilitating regulatory environment, adhering to best international standards and practices.

The Legislative Council passed the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022 on 7 December 2022. The bill reinforces Hong Kong’s status as an international financial centre by enhancing the city’s regulatory regime for combating money laundering and terrorist financing, and by formulating a comprehensive and balanced regulatory framework for virtual asset (VA) activities to protect investors.

The new licensing regime for Virtual Asset service providers will take effect on June 1, 2023.

On 31 January 2023, the Hong Kong Monetary Authority (HKMA) issued the consultation conclusion to the discussion paper on crypto-assets and stablecoins (the “Consultation Conclusion”), summarising the feedback received in relation to the paper and the HKMA’s response.  In the Consultation Conclusion, the HKMA proposes to bring certain activities relating to stablecoins into the regulatory perimeter, and indicates the expected regulatory scope and key regulatory requirements.

The HKMA received a total of 58 submissions in response to the discussion paper on crypto-assets and stablecoins from the industry, public bodies, business and professional organisations, and individuals, etc. On the whole, the respondents were supportive of regulating stablecoins with a risk-based and agile approach.   The respondents also broadly supported the need to take into account the latest market developments and draw reference from the discussion of international regulatory bodies when developing the relevant regulatory regime.

Cyberport established the Web3 Hub@Cyberport early this year.  The HK Government will allocate $50 million HKD to expedite the Web3 ecosystem development by, among other things, organising major international seminars, to enable the industry and enterprises to better grasp frontier development and to promote cross-sectoral business co-operation, as well as arranging a wide array of workshops for young people.

Virtual assets (VA) are an integral part of a vibrant Web3 ecosystem.  The policy statement on VA issued in October last year has set out the HK Government's policy stance and approach towards the relevant sector.  The market has responded proactively.  Over the past few months, a large number of innovative enterprises with potential have been considering setting up business in Hong Kong.  For the next step, the HK Government will establish and lead a task force on VA development, with members from relevant policy bureaux, financial regulators and market participants, to provide recommendations on the sustainable and responsible development of the sector.

The Top Talent Pass Scheme seeks to attract top talents with rich work experience and good academic qualifications from all over the world to explore opportunities in Hong Kong. These top talents include high-income talents and graduates from the world’s top universities.

Eligibility:

1. Annual Income > HK$2.5 million
2. Graduates of top 100 universities + 3 years of work experience
3. Graduates of top 100 universities with < 3 years of work experience

* Items 1 & 2 have no annual quota; while item 3:10,000 per year

The Chief Executive announced in his Policy Address in October 2022 that the Government would establish OASES for attracting high potential and representative strategic enterprises from around the globe.

OASES will:

1. draw up a list of target enterprises and provide steer to the Dedicated Teams for Attracting Businesses and Talents to reach out to and carry out negotiations with the enterprises;
2. formulate attractive special facilitation measures covering aspects such as land, tax and financing that are applicable exclusively to target enterprises, and provide them with tailor-made plans to facilitate the setting up of their operations in Hong Kong;
3. provide the employees of these target enterprises with one-stop facilitation services in areas such as visa application and education arrangements for their children.

The Government announced the members of the Hong Kong Investment Corporation’s board of directors.

With the Financial Secretary as chairman, the board's members include relevant government officials and leaders from the community and business sectors.

In the 2022 Policy Address, the Chief Executive announced the establishment of the Hong Kong Investment Corporation to further optimise the use of financial reserves for promoting the development of the economy and industries of Hong Kong. The corporation will manage the Hong Kong Growth Portfolio, the Greater Bay Area Investment Fund and the Strategic Tech Fund set up under the Future Fund as well as the newly formed Co-Investment Fund.

• Hong Kong Growth Portfolio - HK$22 billion
• GBA Investment Fund - HK$5 billion
• Strategic Tech Fund - HK$5 billion
• Co-Investment Fund - HK$30 billion

On 8 June 2021, The Hong Kong Monetary Authority (HKMA) unveiled “Fintech 2025”, its new strategy for driving fintech development of Hong Kong. 

The financial sector will adopt technology comprehensively by 2025, and deliver fair and efficient financial services for the benefit of Hong Kong people and economy.

5 Focus Areas:

1. All banks go fintech
2. Future-proofing Hong Kong for Central Bank Digital Currencies (CBDCs)
3. Creating the next-generation data infrastructure
4. Expanding the fintech-savvy workforce
5. Nurturing the ecosystem with funding and policies