Hong Kong issues Policy Declaration 2.0, creating a global digital asset innovation center.
On June 26, the Hong Kong SAR government published the (Hong Kong Digital Asset Development Policy Declaration 2.0) (referred to as (Policy Declaration 2.0)), reaffirming the government's commitment to making Hong Kong a global innovation center in the digital asset field.
(Policy Declaration 2.0) proposes the "LEAP" framework, including optimizing legal and regulatory (Legal and regulatory streamlining), expanding the suite of tokenized products (Expanding the suite of tokenized products), advancing use cases and cross-sectoral collaboration (Advancing use cases and cross-sectoral collaboration), and people and partnership development (People and partnership development).
"Optimizing legal and regulatory" content shows that the Hong Kong government is constructing a unified and comprehensive regulatory framework for digital asset service providers, covering digital asset trading platforms, stablecoin issuers, digital asset trading service providers, and digital asset custodial service providers.
(Policy Declaration 2.0) clarifies that the SFC is the primary regulatory authority for digital asset trading service providers, responsible for licensing and registration matters, setting standards, optimizing regulatory processes, and reducing potential regulatory arbitrage under different digital asset regulatory frameworks; the Hong Kong Monetary Authority will serve as the frontline regulatory body for banks, overseeing their digital asset trading activities.
In the section on "Advancing use cases and cross-sectoral collaboration," (Policy Declaration 2.0) supports stablecoins and other tokenization projects, including exploring the use of stablecoins as payment tools.
(Policy Declaration 2.0) indicates that stablecoins provide a cost-effective alternative outside of traditional systems, with the potential to revolutionize payments, supply chain management, and capital market activities. The Hong Kong government will implement a regulatory framework for stablecoin issuers starting from August 1, 2025, establishing relevant requirements for reserve asset management, stabilization mechanisms, redemption processes, and prudent risk management.
(Policy Declaration 2.0) shows that many companies engaged in cross-border trade and settlement have expressed strong interest in using stablecoins to reduce costs and expedite transaction processes. To fully realize the potential of stablecoins, the government and regulatory bodies will provide a favorable market environment and necessary regulatory guidance to facilitate research and implementation of schemes by licensed stablecoin issuers in Hong Kong to address substantive pain points in economic activities. The Hong Kong government welcomes market participants to suggest how to experiment with and utilize licensed stablecoins, such as improving the efficiency of government payments.
Additionally, Cyberport will launch a pilot funding program for blockchain and digital assets, providing funding for projects with future application potential, significance, and market impact.
The following is the full text of the (Policy Declaration 2.0):
Hong Kong Digital Asset Development Policy Declaration 2.0
Vision: To build a trustworthy and innovation-driven digital asset center.
The Hong Kong Special Administrative Region Government is committed to building Hong Kong into a global leading digital asset center—a market where innovation can thrive in a controlled risk environment, bringing substantial benefits to the real economy and financial markets, and is trustworthy.
The (Hong Kong Digital Asset Development Policy Declaration 2.0) published by the Financial Services and the Treasury Bureau ("FSTB") ("Policy Declaration 2.0") is a proactive response from Hong Kong to the ongoing evolution of the global digital asset market. Upholding the principle of "same business, same risks, same rules," the (Policy Declaration 2.0) aims to outline forward-looking strategies that empower industry development, promote inclusive finance, nurture talent, while ensuring investor protection and maintaining financial security, thereby consolidating Hong Kong's leading position as an international financial center.
"LEAP": Moving towards the formation of a trustworthy, sustainable, and deeply integrated digital asset ecosystem within the real economy.
Building on the initiatives proposed in the first (Policy Declaration) issued in October 2022, including establishing robust regulation, launching innovative products such as digital asset exchange-traded funds ("ETFs"), expanding investor channels through allowing retail participation, and initiating pilot projects for green bond tokenization, Hong Kong is now ready to embark on forming a trustworthy, sustainable, and deeply integrated digital asset ecosystem with the real economy under the "LEAP" framework. The Securities and Futures Commission ("SFC") previously announced the "ASPIRe" roadmap, aimed at guiding Hong Kong's digital asset ecosystem towards the future in a constantly changing environment, implementing a series of measures such as adaptive compliance and product frameworks (e.g., derivatives trading), balancing investor protection and market competitiveness. (Policy Declaration 2.0) outlines the next phase of development, focusing on enhancing the liquidity of digital asset trading, promoting a more diversified supply of digital asset products, to strengthen Hong Kong's position as a global digital asset center. The government and regulatory bodies also welcome high-quality digital asset service providers from around the world to participate in the market to promote liquidity and healthy, orderly competition.
To achieve this vision and goal, and to create a digital asset ecosystem that is deeply integrated with the real economy and financial markets, and future-oriented, we propose a series of strategic policy directions and will implement corresponding measures. In formulating policy directions and measures, we strive to ensure they are not limited by current technologies and can adapt to future developments in digital assets while integrating with the real economy and financial system for sustainable growth. These initiatives are framed under "LEAP," which includes—("L"egal and regulatory streamlining), ("E"xpanding the suite of tokenized products), ("A"dvancing use cases and cross-sectoral collaboration), and ("P"eople and partnership development)—to build a trustworthy, innovative, and vibrant digital asset ecosystem, reinforcing Hong Kong's leading position in the global financial landscape.
("L"egal and regulatory streamlining)
(a) Unified and comprehensive regulatory framework
Building on the progress made since 2022, the government will continue to collaborate with regulatory bodies and industry stakeholders to develop a comprehensive legal and regulatory framework governing digital assets, ensuring the sustainable and responsible development of Hong Kong's digital asset ecosystem. This framework covers digital asset exchanges, stablecoin issuers, digital asset trading service providers, and digital asset custodial service providers, with a focus on investor and consumer protection. The next key measure is to conduct public consultations on the licensing mechanisms for digital asset trading service providers and custodial service providers to meet investors' needs for high liquidity, large transactions, and secure custodial assets. The government recommends designating the SFC as the primary regulatory body for digital asset trading service providers, responsible for licensing and registration matters, setting standards, optimizing regulatory processes, and reducing potential regulatory arbitrage under different digital asset regulatory frameworks. The Hong Kong Monetary Authority ("HKMA") will act as the frontline regulatory authority for banks, overseeing their digital asset trading activities.
Similarly, the SFC will serve as the primary regulatory body for digital asset custodial service providers, responsible for licensing and registration, as well as setting standards, while the Monetary Authority will act as the frontline regulatory authority for banks, overseeing their digital asset custodial activities.
This unified and comprehensive regulatory arrangement will enhance market credibility, promote broader digital asset activities and large transactions, and provide clear guidance for market participants. This arrangement will also support effective risk management and provide liquidity, ensuring the establishment of a balanced ecosystem that promotes market innovation and protects investors. Regular reviews and close communication with stakeholders will be conducted to ensure that the framework can adapt to technological and market developments.
Meanwhile, Hong Kong will continue to implement international standards related to digital assets, including the International Organization of Securities Commissions' (IOSCO) (Policy Recommendations on Crypto and Digital Asset Markets), the Financial Stability Board's (FSB) (Global Regulatory Framework for Crypto Asset Activities), the Basel Committee on Banking Supervision's (BCBS) (Prudential Treatment of Crypto Asset Risks), and the Organization for Economic Cooperation and Development's (OECD) (Crypto Asset Reporting Framework) to promote tax transparency.
(b) Review of Tokenization Laws and Regulations
The tokenization of real-world assets and financial instruments provides opportunities for integrating new technologies with traditional finance, driving innovation in economic activities and financial market structures, thereby enhancing efficiency, reducing costs, increasing transparency, and promoting investor participation. To fully harness these potentials, a clear, explicit, and convenient legal and regulatory system is essential. The FSTB and HKMA will lead a review of the relevant legal and regulatory frameworks, referencing international experiences and practices to promote further applications of tokenization in Hong Kong. The initial review will focus on the bond market that has passed the proof-of-concept stage, with the expectation of providing references for the tokenization of other real-world assets and financial instruments. A comprehensive review of the issuance and trading processes of tokenized bonds will be conducted, including but not limited to settlement, registration, and record-keeping requirements. During the review process, the government will collaborate with legal experts and industry stakeholders to ensure that the review outcomes and related improvement recommendations are practical and meet future development needs, making Hong Kong a pioneer in this innovative field.
("E"xpanding the suite of tokenized products)
(c) Regularizing the issuance of tokenized government bonds
The government has issued tokenized green bonds twice (totaling approximately HKD 6.8 billion), proactively demonstrating the benefits of tokenization schemes. Building on this, the government will regularize the issuance of tokenized government bonds and explore different currency and term arrangements, as well as other innovative options. The government aims to provide the market with stable and high-quality digital bonds through this initiative, further expanding accessibility and attracting a broader investor base. To further harness the advantages of tokenization, the Financial Secretary's Office and the Monetary Authority will continue to communicate with industry experts to understand various market perspectives, including incorporating digital currencies to enhance transaction efficiency, secondary market trading applications, and further expanding investor participation in the local bond market. The government aims to establish a global benchmark by being the first to issue tokenized bonds and regularizing them, enhancing market confidence in this technology while encouraging adoption in both the public and private sectors.
(d) Providing incentives for the tokenization of real-world assets and financial assets
Tokenization of real-world assets and financial market instruments can enhance the efficiency, accessibility, and potential liquidity of the Hong Kong market. Through the HKMA's Ensemble project (with the SFC as the main partner, leading the participation of the asset management industry), innovative use cases are actively encouraged, including the tokenization of traditional financial products (such as money market funds and other funds) and the revenue streams of real-world assets (such as electric vehicle charging stations). The HKMA is exploring the establishment of Ensemble infrastructure to facilitate the settlement of tokenized deposits in the interbank market, simplifying processes and enhancing liquidity.
The London Metal Exchange (LME) has included Hong Kong as a licensed delivery point within its global warehouse network, approving warehouse operators in Hong Kong to store metals registered with the LME. To further develop the commodity trading ecosystem, the government encourages the application of tokenization and physical asset tracking technology within warehousing programs. Token creation technology can serve as an identification label for global warehouses, assisting in tracking metal assets and related data on sustainability, promoting Hong Kong's further integration into the global warehouse network.
The government will intensify efforts to expand tokenization schemes, promoting wider tokenization of assets and financial instruments, demonstrating the diverse applications of this technology across different sectors, including precious metals (such as gold), non-ferrous metals, and renewable energy (such as solar panels).
Currently, all exchange-traded funds (ETFs) listed on the Hong Kong Stock Exchange are exempt from stamp duty when transferred. To promote the development of the tokenization market, the government will clarify that such stamp duty exemptions also apply to tokenized ETFs. Based on this exemption, the government welcomes market participants to explore the advantages of tokenizing ETFs, such as money market ETFs, including introducing them for secondary market trading on licensed digital asset trading platforms or other platforms. Looking ahead, the government will maintain an open attitude, considering factors such as fiscal impact and market development, to review the tax arrangements for the transfer of other SFC-recognized funds after tokenization.
The government will submit legislative proposals to include specified digital assets in private placement funds and family investment control tools that qualify for profits tax exemptions. If the proposal is passed by the Legislative Council, the tax exemptions will take effect from the 2025/2026 tax year.
("A"dvancing use cases and cross-sectoral collaboration)
(e) Supporting stablecoins and other tokenization projects, including exploring the use of stablecoins as payment tools
Stablecoins provide a cost-effective alternative outside of traditional systems, with the potential to revolutionize payments, supply chain management, and capital market activities. The government will implement a regulatory framework for stablecoin issuers starting from August 1, 2025. This framework establishes reasonable requirements for reserve asset management, stabilization mechanisms, redemption processes, and prudent risk management, serving as the cornerstone for achieving the aforementioned vision. These regulatory requirements help ensure the stability and credibility of stablecoin issuance, enhancing its reliability for use locally and internationally. Many companies engaged in cross-border trade and settlement have expressed strong interest in using stablecoins to reduce costs and expedite transaction processes. To fully realize the potential of stablecoins, the government and regulatory bodies will provide a favorable market environment and necessary regulatory guidance to facilitate licensed stablecoin issuers in researching and implementing schemes in various application scenarios to address substantive pain points in economic activities. To demonstrate the government's support and take a leading role, market participants are welcomed to suggest how the government can experiment with and utilize licensed stablecoins, such as improving government payment efficiency.
(f) Promoting collaboration among regulatory bodies, law enforcement agencies, and technology providers
As a digital technology incubator in Hong Kong, Cyberport has been actively supporting tokenization projects in Hong Kong and has created a thriving environment for startups to explore innovative fintech solutions through collaboration with the Monetary Authority on the Ensemble project. To further support the development of tokenization projects, Cyberport will collaborate with relevant stakeholders in the digital asset industry, leveraging its incubation ecosystem to provide support, including business matching opportunities, technical assistance, industry expert guidance, and participation in accelerator programs related to digital assets and Web3. Startups and companies engaged in tokenization solutions will benefit from dedicated resources that enable them to experiment with innovative ideas and commercialize them. Cyberport will also launch a pilot funding program for blockchain and digital assets, providing funding for projects with future application potential, significance, and market impact. Beyond funding, Cyberport will assist these companies and coordinate with relevant stakeholders to support the implementation of pilot projects as needed.
The dedicated team of the InvestHK welcomes and is ready to provide support