Following is a question by the Hon Shang Hailong and a written reply by the Secretary for Financial Services and the Treasury, Mr Christopher Hui, in the Legislative Council today (July 30):
 
Question:
 
     In 2022 and this year, the SAR Government promulgated two policy statements on the development of virtual assets (VA) in Hong Kong respectively, explicitly positioning the city as a premier global hub for digital assets and taking forward various legislative and regulatory measures. These include the passage of the Stablecoins Bill and the introduction of a licensing regime for VA service providers (the licensing regime). However, some industry participants have expressed concerns about whether the existing policies can strike an appropriate balance between investor protection and innovation promotion, and how Hong Kong will address international competition (such as the regulatory frameworks for stablecoins established by the United States and Singapore). In this connection, will the Government inform this Council:
 
(1) as there are views that under the existing licensing regime, only 10 institutions from both local and overseas markets have been granted licences, and that the Securities and Futures Commission (SFC)'s approval speed lags behind that of competitors such as Singapore, whether the authorities have drawn up a specific timetable to further streamline the licensing process, in order to attract more compliant enterprises to establish a presence in Hong Kong; whether it will draw reference from international standards (such as the European Union's Markets in Crypto-Assets Regulation) to develop a more flexible regulatory sandbox mechanism that encourage trials of financial technology;
 
(2) whether the authorities will, within the next three years, regularise the issuance of tokenised bonds and extend this to other asset classes (such as real estate or private equity funds); how the Government will resolve the current lack of uniformity in cross-institutional tokenisation standards, for example, whether it will establish a co-ordination mechanism jointly with the Hong Kong Monetary Authority, SFC and the Hong Kong Exchanges and Clearing Limited; and
 
(3) whether it will strengthen co-operation with relevant Mainland institutions (such as the Digital Currency Institute of the People's Bank of China) and international organisations (such as the International Monetary Fund), in order to establish cross-boundary agreements on VA regulation and anti-money laundering initiatives?
 
Reply:
 
President,
 
     The Government issued the Policy Statement 2.0 on the Development of Digital Assets in Hong Kong (Policy Statement 2.0) in June 2025. Building on the first policy statement released in October 2022, Policy Statement 2.0 reaffirms the Government's commitment to positioning Hong Kong as a global hub for innovation in the digital asset field.
 
     One of the key focuses of Policy Statement 2.0 is enhancing the legal and regulatory framework. A comprehensive regulatory framework provides a solid foundation for the sustainable development of the digital asset sector. Following the implementation of the licensing regime for digital asset trading platforms in June 2023, the Stablecoins Ordinance will come into effect on August 1 this year. At the same time, the Government and the Securities and Futures Commission (SFC) are consulting the public on the licensing regimes for digital asset dealing service and custodian service providers, with a view to formulating the legislative proposals as soon as practicable. Upon the completion of the legislative work, the regulatory framework in Hong Kong will provide comprehensive coverage of the key nodes of the digital asset industry, balancing risk management and investor protection, while providing favourable conditions for market development and financial innovation.
 
     After consulting the Hong Kong Monetary Authority (HKMA), the SFC, and the Hong Kong Police Force, our reply to the various parts of the question is as follows:
 
(1) As of early July 2025, the SFC has officially granted licences to 11 digital asset trading platforms with both local and overseas background, and is processing an additional nine licence applications. The time required to process licence applications regarding digital asset trading platform varies, depending on various factors such as the completeness of the information provided by the applicants, the adequacy of the supporting documents submitted by the applicants, and the time taken by the applicants to respond to requests for further information during the SFC's assessment process.
 
     Based on the practical experience in processing licence applications, the SFC from time to time reviews and enhances relevant procedures to help applicants better understand the SFC's regulatory expectations, thereby reducing the time required for licence assessments. In this regard, the SFC launched a swift licensing process in June 2024, under risk-based on-site inspections would be conducted on those deemed-to-be-licensed digital asset trading platform applicants. During the process, the SFC would communicate direct with the senior management and ultimate controllers of the relevant applicants about regulatory standards, so as to reduce the time required for granting relevant licences.
 
     Subsequently, the SFC expanded in January 2025 the scope of the swift licensing process to include all new applicants for a digital asset trading platform licence. Under the swift licensing process, applicants are required to first establish internal policies, procedures, systems and monitoring measures, which must then undergo external assessment. The SFC acts as one of the parties overseeing the entire external assessment process. The SFC continues to review the circumstances in respect of applications for a digital asset trading platform licence, with a view to facilitating more digital asset trading platform operators from diverse backgrounds to commence business in Hong Kong.
 
     In addition, to promote financial innovation, regulatory authorities such as the HKMA, the SFC, and the Insurance Authority have established various regulatory sandbox mechanisms. These enable innovative use cases in tokenisation, blockchain, generative AI (artificial intelligence) and insurance technology to be tested under a risk-controlled environment before their actual application, while receiving technical support and regulatory feedback from the regulatory authorities. The design of these sandboxes has taken reference to both local and overseas experience to foster a healthy and sustainable environment for the market, helping financial institutions seize opportunities and responsibly adopt financial technologies.
 
(2) The Government made two issuances of tokenised green bonds in 2023 and 2024, which demonstrated the benefits of tokenisation and were well received by the market. The two issuances represented the first tokenised green bond issued by a government and the first multi-currency digitally native tokenised bonds in the world respectively. In the 2025-26 Budget, the Government announced the regularisation of tokenised bond issuance, and the HKMA is currently preparing for the third issuance.
 
     As highlighted in Policy Statement 2.0, the Government recognises the potential of tokenisation of traditional financial products and real-world assets. The Government has also observed growing interest among financial institutions in tokenising traditional financial instruments, and that more and more intermediaries are exploring tokenisation of securities and distributing tokenised securities. In fact, the SFC issued "Circular on intermediaries engaging in tokenised securities-related activities" and "Circular on tokenisation of SFC-authorised investment products" in November 2023, providing guidance to intermediaries on managing new risks posed by tokenisation technology and related investment products, thereby promoting the steady, responsible and sustainable development of the tokenisation market.
 
     Building on the above, the SFC authorised in 2024 the first tokenised investment product for retail access in Hong Kong. That is a gold token that allows investors to acquire fractional ownership of physical gold. In the first quarter of 2025, the SFC further authorised three retail tokenised money market funds, which were the first in the Asia Pacific region. As of the end of March 2025, these funds had a total of over $700 million assets under management.
 
     Meanwhile, through the HKMA's Project Ensemble, we are actively encouraging innovative use cases, including the tokenisation of traditional financial products (e.g. money market funds and other funds) and revenue streams of real-world assets (e.g. electric vehicle charging stations). The SFC is a key partner of Project Ensemble, and has been working with the HKMA to promote the wider adoption of tokenisation in the asset management industry. The HKMA is also exploring the development of innovative financial market infrastructure, providing a unified technical foundation to facilitate interbank settlement of tokenised deposits.
 
(3) Hong Kong has been actively participating in international efforts to combat money laundering and terrorist financing, including the development of standards and regulations relating to digital assets. In particular, Hong Kong's regime for anti-money laundering and counter-terrorist financing has been recognised by the Financial Action Task Force (FATF), the setter of relevant international standards, as both overall compliant and effective, especially in international co-operation.
 
     Currently, Hong Kong is participating in the discussion of the Virtual Assets Contact Group under the FATF, so as to keep abreast of the latest related risks in respect of money laundering and terrorist financing and to foster international collaboration in this area. Meanwhile, the HKMA is leading the Financial Stability Board's review of the global implementation of the global regulatory framework for crypto-asset activities.
 
     In addition, the Joint Financial Intelligence Unit under the Hong Kong Police Force is a member of the Egmont Group of Financial Intelligence Units, exchanging information with over 160 member financial intelligence units worldwide. This supports cross-jurisdiction enforcement and intelligence-sharing efforts to combat money laundering and terrorist financing, including cases involving digital assets.
 
     At the same time, the anti-money laundering related agencies in the Mainland, the Hong Kong Special Administrative Region and the Macao Special Administrative Region have established mechanisms for regular exchanges and close collaboration.
 
     The Financial Services and the Treasury Bureau, financial regulators and law enforcement agencies will continue to monitor the risks associated with money laundering, terrorist financing and digital assets. We will maintain close communication and collaboration with relevant international organisations and relevant agencies in other jurisdictions, including the Mainland.
 
     Hong Kong has also maintained close communication with regulators around the world on the regulation and developments of digital assets. As major regions around the world gradually implement regulatory regimes related to digital assets, Hong Kong will continue to exchange regulatory experience with the international community, strengthen cross-border/cross-boundary regulatory collaboration, and jointly promote financial stability and innovation.

Ends/Wednesday, July 30, 2025
Issued at HKT 16:08

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