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Hong Kong economy
OpinionComment
Amy Zhang
Amy Zhang

Opinion | How Hong Kong can re-establish itself as a global digital assets hub

  • With the inclusion of retail investors in its new regulatory regime, Hong Kong is becoming known as a digital-asset-friendly jurisdiction
  • To become a true hub, it must continue to regulate effectively, recognise the specific tech requirements and include emerging retail and institutional use cases

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A Hong Kong Digital Asset Exchange booth is seen during Fintech Week in Hong Kong on October 31, 2022. The new regulatory regime could spur further innovation in Hong Kong and drive the adoption of digital assets. Photo: AFP
Amy Zhang
The recent announcement by the Hong Kong Securities and Futures Commission (SFC) that individual investors can from June 1 buy and sell digital assets – such as bitcoin or ethereum – has shifted the spotlight back on the city. While regulators around the world are clamping down on digital assets, Hong Kong seeks to re-establish its position as a global financial hub for digital asset innovation.

But it is not just digital asset companies that will be supported by this new regulatory regime – financial institutions and corporations are beginning to produce distributed-ledger technology to increase efficiencies, reduce costs and offer new services to clients. This regime might just be the catalyst to spur further innovation in Hong Kong and drive the adoption of digital assets.

With the oversight of the SFC, the Hong Kong Monetary Authority and the new regulatory guidance, financial institutions will have more incentive to explore the incorporation of blockchain technology, including tokenising traditional assets and offering digital asset trading using secure and flexible wallet technology.

Tokenisation – a digital representation of a traditional asset that can be stored, transferred and settled over blockchain – allows for a common platform for traditional and digital assets to interact. This next phase in the evolution of digitisation will drive down transaction processing times, improve end-to-end transparency and attract a larger investor base.

Tokenisation is being used across multiple asset classes, including commodities, debt securities, equity securities and real estate.

In February, the Hong Kong government issued HK$800 million (US$102 million) of tokenised green bonds – the first to be issued by a government globally. In this case, tokenisation creates greater efficiencies in the bond life cycle by digitising coupon payments, settlement of secondary trading and maturity redemption, allowing the government to sell these bonds with ease.
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