With the Hong Kong government’s official announcement of the openness and inclusiveness of the Crypto market in 2022, many capitals have chosen to return to their own "battlefield". So on the first anniversary of the release of virtual assets in Hong Kong, what major policies are promoting the development of virtual assets?

Introduction It has been exactly one year since the "Policy Declaration on the Development of Virtual Assets in Hong Kong" issued by the Hong Kong Financial Services and the Treasury Bureau in October 2022. This article will sort out the policies and regulations issued by the government this year. With the prosperity of the last round of the cryptocurrency world, more and more markets have set their sights on the cryptocurrency field, and many institutional and individual investors are eager to try. However, due to the unclear policies around 2021, a large amount of capital and institutions have "fled" to cryptocurrency-friendly countries such as Singapore and the United States.

With the Hong Kong government's official announcement of the opening and tolerance of the Crypto market in 2022, many investors have chosen to return to their own "battlefield". So, on the first anniversary of the development of virtual assets in Hong Kong, what major policies are promoting the development of virtual assets? This article will introduce and follow up on the relevant policy contents one by one!

An inventory of Hong Kong’s Web 3.0 support policies

After Hong Kong supported the vigorous development of NFT, Gamef and other tracks, the Hong Kong government first announced on October 16, 2022 that it would promote the digital Hong Kong dollar as the first bridge to link virtual assets, and then issued government tokenized green bonds to show support for the distribution Ledger technology (efficient, reduced costs, increased trust). During Hong Kong Technology Week (October 30, 2022), the Hong Kong government announced that it would establish a US$4 billion technology fund to support entrepreneurship in blockchain, Web3 and other technology companies. The Hong Kong government will use practical policies to Support the development of the industry. Following the approval of the ETF, on the same day, the Hong Kong Securities and Futures Commission issued a letter authorizing the public sale of virtual asset futures exchange-traded fund ETFs.

The SFC only allows the issuance of index funds for virtual asset futures traded on traditional regulated futures exchanges, and only approves index funds for Bitcoin futures and Ethereum futures traded on the Chicago Mercantile Exchange. Based on the first allocation, Hong Kong Financial Secretary Paul Chan Mo-po allocated HK$50 million for the ecological construction of web3 in April 2023. If the bear market can show the government's attention to Web3 and its financial support, I believe that in the bull market, all outstanding Web3 entrepreneurs will be able to get greater help from the government, both in terms of real economics and policy support.

Regulatory policy process

As early as November 2019, Hong Kong regulated cryptocurrency exchanges. Only licensed CEXs could provide corresponding services to investors, but only one CEX (OSL) was licensed. It was not until the Hong Kong government officially announced its strong support for the development of the Crypto industry that a turning point came. According to the official website of the Hong Kong SFC, many exchanges are now queuing up to apply for licenses. The exchange approved in 2022 is Hashkey. Meex is currently the Hong Kong exchange whose application has not been rejected in 2023. The application results will be announced before 12/10/2023. In 2022, exchanges will only be limited to professional investors, and retail business will not be open to retail investors for the time being. However, in August 2023, the Hong Kong government announced that listed exchanges can sell to retail investors, which is enough to prove the Hong Kong government's determination to promote the globalization of cryptocurrency assets.

There are also differences in the licenses issued by the Hong Kong SFC. The most critical ones are License No. 1 and License No. 7 (for securities trading and provision of automated trading services, respectively). These are necessary conditions for the establishment of compliant exchanges. License No. 9 is also a focus of the market. The difference is that it can custody user funds, which is a necessary condition for private or public offerings. Exchanges do not currently need to change their licenses.

Regarding the regulation of NFT, the Hong Kong Securities and Futures Commission issued an announcement on June 6, 2022, "Reminding Investors to Be Aware of NFT Risks", stating that most NFTs are intended to represent their related assets, such as a unique version of an electronic image, artwork, music or film. In general, if an NFT is a collectible that truly exists in digital form, activities related to it are not within the scope of the SFC's supervision. Gamefi, like NFT, will be included in the list of regulatory policies for anything that can generate income, such as Tokens, to protect the rights and interests of consumers.

In terms of trading currencies, Tong Yi, president of the Hong Kong Blockchain Association, said: "Tokens such as Bitcoin and Ethereum are defined as utility tokens, so they do not need to be registered or audited. Every token circulating in the market needs to go through independent judicial cases or even legal proceedings to determine whether it is a security token or a utility token. You can submit legal opinions to the SFC like Ripple and sue the SFC to prove that their interpretation is wrong." Figure 3 Regulation of tradable currencies Stablecoins. According to the "Discussion Paper on Crypto Assets and Stablecoins" issued by the Hong Kong Monetary Authority in 2023, stablecoins should be fully backed and allowed to be redeemed at face value, and they have high liquidity. Stablecoins based on arbitrage or algorithms will be rejected, such as DAI, which will exempt investors from potential property losses caused by algorithmic stablecoins such as LUNA.

Exchange protection, according to the documents published by the Hong Kong Securities and Futures Commission, platform operators must always maintain a paid-up capital of not less than HK$5 million (i.e. the "minimum amount of paid-up capital"). Platform operators should always beneficially own fully liquid assets in Hong Kong, such as cash, deposits, treasury bills and certificates of deposit (but not virtual assets), the amount of which should be equal to the actual operating expenses of the platform operator calculated on a continuous basis for at least 12 months. In addition, platform operators should establish and implement strict internal control measures and governance procedures for private key management to ensure the safe generation, storage and backup of all encryption seeds and private keys. Both seeds and private keys are stored in Hong Kong.

summary

From the implementation of support policies to regulatory policies, we can see the Hong Kong government's determination and attitude towards the development of the virtual asset industry. In terms of support, it uses open policies and financial assistance to attract more and more entrepreneurs to embrace Hong Kong's cryptocurrency industry.

From the perspective of regulatory policies, the most direct help is to open retail trading licenses, not just professional investors. This will greatly promote the user group of Hong Kong's cryptocurrency industry, and at the same time strictly regulate the currencies and businesses listed on exchanges. While users gain more trading rights, their safety is greatly guaranteed. Hong Kong will eventually become a friendly harbor for the cryptocurrency industry and return to its peak! #sfm #BTC #sol #fomc #ETH。 $BTC $ETH $XRP