Retail access for virtual assets – risky business or radical open-mindedness?

A lot of the detail can be found in the policy statement issued by the Financial Services and the Treasury Bureau yesterday, as well as the keynote speech by Julia Leung of the Securities and Futures Commission (SFC). Hong Kong will continue to adopt the “same activity, same risks, same regulation” principle, and will put in place the necessary guardrails to ensure the continued innovation of VAs in a sustainable manner.

Five key takeaways from Day One of Fintech Week

The following are five key takeaways from Day One of Fintech Week that will be of relevance to a range of market participants, including banks, broker-dealers, fund managers, VA exchanges and investors:

1. The SFC has issued a circular setting out guidance on the authorisation requirements for VA futures exchange-traded funds (VA Futures ETFs);
2. The SFC is prepared to move away from its current approach of classifying all tokenised securities as “complex products”, and will issue further guidance on security token offerings (STOs), including a proposed modified security token regime;
3. The SFC will consult on the more detailed requirements for the new virtual asset service provider (VASP) regime, including whether the professional investor (PI)-only requirement should be relaxed. This follows the introduction of the new licensing regime for VASPs via legislative amendments which are currently being considered by the Legislative Council (LegCo) (see our June 2022 briefing and our June 2021 briefing);
4. The Hong Kong Monetary Authority (HKMA) will publish its consultation outcome following its discussion paper on crypto-assets and stablecoins (see our January 2022 briefing); and
5. The Government and regulators are engaging in a number of pilot projects in relation to VAs, including (i) issuance of non-fungible tokens (NFTs) for Hong Kong Fintech Week; (ii) Green bond tokenisation; and (iii) e-HKD. The HKMA has also announced a number of new initiatives to spur fintech development in Hong Kong.

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