Hong Kong Treasury: There are currently over 300 Web3 related companies in Hong Kong, and it is not ruled out that the Exchange Fund may be involved in cryptocurrency asset investments

Article source: Dongwang

On December 10th, Chen Haolian, Deputy Secretary for Financial Services and the Treasury, met with about 10 representatives from the Web 3 and Artificial Intelligence (AI) industries to discuss the latest developments in Web 3 and AI. He pointed out that there are currently over 300 Web3 related companies in Hong Kong, and three virtual asset trading platforms have been licensed by the Hong Kong Securities and Futures Commission. It is estimated that several more virtual asset trading platforms will be licensed within this year.

He mentioned that in order to promote the development of the virtual asset industry, the Treasury Bureau will submit a bill to the Legislative Council this year to regulate issuers of fiat stablecoins, in order to address risks related to money laundering and terrorist financing, protect investors, and promote healthy and orderly market development. In addition, a second round of public consultation will be conducted next year on the regulation of over-the-counter trading of virtual assets, and a proposed licensing system for regulating virtual asset custody service providers will be proposed. According to a Legislative Council document, the Stablecoins Bill will undergo its first reading on the 18th of this month.

In terms of Hong Kong's foreign exchange reserves, in a written reply to a member's question on December 11 about whether digital assets and cryptocurrencies would be considered for inclusion in the fiscal reserves, Chen Haolian stated that the Exchange Fund invests in a globally diversified asset class and market to diversify risks and enhance long-term returns. Although cryptocurrency is not the target asset of the Exchange Fund's investment, the external investment managers of the Hong Kong Monetary Authority also invest in a globally diversified asset class and market. In the investment operations of the external investment managers at different times, there may be individual investments involving cryptocurrency, but the proportion is very small.

Chen Haolian continued to point out that the authorities issued the "Policy Declaration on the Development of Virtual Assets in Hong Kong" in October 2022, stating that the government and regulatory agencies will adhere to the principle of "same business, same risk, same rules" and strive to improve the regulatory framework for virtual assets. In addition, the authorities have introduced a licensing system for virtual asset service providers through the revision of the Anti Money Laundering and Counter Terrorist Financing Ordinance (Chapter 615) to ensure that virtual asset trading platforms comply with international standards for combating money laundering and terrorist financing, as well as to protect investors. The Treasury will consult the Financial Affairs Committee of the Legislative Council on the regulation of stablecoin issuers this year and will submit relevant bills to the Legislative Council this month.

As for the over-the-counter trading services of virtual assets, the authorities are adjusting their proposals in response to the results of the public consultation conducted earlier this year, and will conduct a second round of public consultation next year. Next year, a proposed licensing system for regulating virtual asset custody service providers will also be proposed.