As the policy highland of Web3.0 in Asia, the Hong Kong government has a positive attitude towards the development of crypto assets. As early as October 2022, the Hong Kong government issued the "Policy Declaration on the Development of Virtual Assets in Hong Kong", and the Secretary for Finance and the Treasury, Paul Chan, pointed out: "Distributed ledger technology (DLT) and Web 3.0 have the potential to become the future of finance and business."

Today, as global cryptocurrency policies continue to develop, Hong Kong Legislative Council member Wu Jiezhuang asked the Hong Kong government questions about Hong Kong's digital asset policies, focusing on fiscal reserves, foreign exchange funds and the regulatory framework for crypto assets. This Legislative Council inquiry will help us understand the latest attitude of Hong Kong officials towards crypto assets. In the future, Hong Kong will further promote the development of the Web3 industry and continue to improve the regulatory framework for crypto policies, as follows:

Bitcoin is known as "digital gold"

As early as June this year, a research report by ICBC International stated that Bitcoin has successfully maintained a scarcity similar to that of gold through its mathematical consensus mechanism, while Ethereum is known as "digital oil" for its unique technology. Wu Zhuangjie also praised Bitcoin as "digital gold" in this inquiry. The advantages of Bitcoin are needless to say. The price of Bitcoin has exceeded $100,000 this month, which also shows that the market fully recognizes the unique value of Bitcoin. In any case, the development of world currency will "move towards digitalization." For example, cross-border payments, central bank digital currencies, etc.

Hong Kong government approves foreign exchange fund investment in crypto assets

Members of the Legislative Yuan asked whether the Hong Kong government would consider incorporating digital assets and cryptocurrencies into its fiscal reserves and whether it would consider using the Exchange Fund to continuously purchase and hold them for a long time. The Deputy Secretary for Financial Services and the Treasury (FSTB), Mr. Chan Ho-lim, gave a positive answer, saying that although crypto assets are not the target assets of the Exchange Fund, "individual investments involving crypto assets are not ruled out" in the operations of external investment managers.
The Hong Kong government admitted that the Exchange Fund includes investments in crypto assets, although "the relevant proportion is very small." Data released by the Hong Kong Monetary Authority (HKMA) on November 29 showed that as of October 31, 2024, the total assets of the Exchange Fund were HK$401.5 billion. As Hong Kong, China, has always been among the top ten in the world in terms of foreign exchange reserves, even if the proportion of crypto asset investments is small enough, it will be a rather astonishing number in the face of a huge base.

Hong Kong government continues to improve regulatory framework for crypto assets

Hong Kong has long had a plan for the regulatory body of crypto assets. The Financial Secretary established a task force to promote the development of Web3 in 2023 to make recommendations to the Hong Kong government on the sustainable and responsible development of the industry; as for specific regulatory policies and measures, the Treasury Bureau is responsible for relevant policy formulation and coordinating relevant departments and financial regulatory agencies.
Currently, the Hong Kong government has introduced a licensing system for virtual asset service providers by amending the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Chapter 615). This month, the Treasury Department consulted the Legislative Council's Financial Affairs Committee on the regulation of legal currency stablecoin issuers this year, and will submit the relevant draft regulations to the Legislative Council within this month. In addition, the supervision and licensing system for VA over-the-counter transactions and custody services are also on the agenda.

Attorney Mankiw's Summary

As Chan Ho-lim, Deputy Director of the Treasury Bureau, said, Hong Kong is Asia's leading international financial center and has a significant influence on the regulation and development of crypto assets. As an important participant in the global crypto asset field, Hong Kong is constantly strengthening its position in the development of the world's Web3 industry through a sound regulatory framework, policy innovation and international cooperation. For Web3 entrepreneurs, especially those with a mainland background, Hong Kong not only provides a fertile ground for Web3 development backed by the mainland, but also provides an important springboard for the global market.
We expect the Hong Kong Securities and Futures Commission to further clarify its crypto asset regulatory policy in 2025, which will help increase the certainty of cryptocurrency regulation, encourage more Web3 practitioners to do business in Hong Kong, and further consolidate Hong Kong's position as a global crypto asset hub. Mankiw is also committed to providing all-round legal support to Web3 practitioners, helping clients take advantage of policy dividends, seize market opportunities, and achieve long-term sustainable development on a global scale.