The Hong Kong government today (26th) issued the Policy Statement 2.0 on the Development of Digital Assets in Hong Kong, reinforcing its commitment to establishing Hong Kong as a global hub for innovation in the digital asset (DA) field. This new policy statement builds upon the foundational measures outlined in the initial policy statement released in October 2022.

The Policy Statement 2.0 sets out a vision for a trusted and innovative DA ecosystem that prioritizes risk management and investor protection, while delivering concrete benefits to the real economy and financial markets. The latest statement introduces the "LEAP" framework, which focuses on:

Legal and regulatory streamlining: The Government is establishing a comprehensive and unified regulatory framework for DA service providers, covering DA exchanges, stablecoins issuers, DA dealing service providers and DA custodian service providers. In particular, the Securities and Futures Commission (SFC) will be the leading authority for the upcoming licensing regimes for DA dealing service providers and DA custodian service providers. Meanwhile, the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority will be spearheading a comprehensive legal review to facilitate the tokenization of real-world assets (RWAs) and financial instruments. The review will adopt a holistic approach and consider different aspects of tokenized bond issuances and transactions, including but not limited to settlement, registration and record requirements.

Expanding the suite of tokenized products: The Government will regularize the issuance of tokenized Government bonds and incentivize the tokenization of RWAs to enhance liquidity and accessibility through, among other initiatives, clarifying the stamp duty treatment for tokenized exchange traded funds (ETFs). With that, the Government welcomes the introduction of secondary market trading of these tokenized ETFs on licensed DA trading platforms or through other channels. The Government will also promote the tokenization of a broader range of assets and financial instruments, demonstrating the versatility of this technology across sectors such as precious metals (e.g. gold) and non-ferrous metals, and renewable energy (e.g. solar panels).

Advancing use cases and cross-sectoral collaboration: The implementation of the licensing regime for stablecoin issuers on August 1 will facilitate the development of real-world use cases. The Government is also fostering collaboration among regulators, law enforcement agencies and technology providers for development of DA infrastructures. To demonstrate support and to take the lead, the Government welcomes proposals from market participants on how the Government may test the usage of licensed stablecoins. Also, Cyberport will launch a funding scheme for blockchain and DA, offering funding to exemplary and high-impact applications with potential to serve as benchmark for future use cases.

People and partnership development: The Government is strengthening talent development through partnerships with industry and academia, and is positioning Hong Kong as a center of excellence for DA knowledge-sharing and international co-operation, including joint research initiatives and global regulatory collaboration. The Government will build a sustainable talent pool through cultivating a new generation of entrepreneurs, researchers and technologists.

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Paul Chan, Hong Kong's Financial Secretary, said that digital assets hold great development potential with significance to fintech. Through the adoption of blockchain technology, more efficient financial transactions at a lower cost can be realized to bring in more inclusive financial services. The Policy Statement 2.0 sets out the Government's vision for DA development and showcases the practical use of tokenization through application, with a view to boosting the diversification of use cases.