Review of Important Events in Hong Kong's Virtual Asset Industry in 2024

In 2024, Hong Kong's virtual asset industry welcomed many significant developments. From the improvement of regulatory frameworks to the launch of innovative products, Hong Kong continues to break new ground in the virtual asset field, demonstrating strong momentum for growth. Let us review the key moments of this year together.

April: Approval of Spot Bitcoin and Ethereum ETFs

The Hong Kong Securities and Futures Commission has officially announced the approved list of virtual asset spot ETFs, which includes related products from several well-known asset management companies. This marks the first launch of such products in the Asian market, with the Ether spot ETF being among the first globally. This move not only enriches Hong Kong's investment product line but also further consolidates Hong Kong's position as a center for financial innovation in Asia.

June: The Turmoil of Virtual Asset Trading Platform License Applications

With the Hong Kong Securities and Futures Commission issuing the VATP license manual and transition arrangement circular, virtual asset exchanges operating in Hong Kong are required to obtain a license issued by the regulatory authority within a one-year transition period. Several platforms are actively submitting applications, but some mainstream trading platforms have chosen to withdraw their applications, sparking discussions in the industry about the prospects of the Hong Kong virtual asset market. This event highlights the challenge of balancing regulation and innovation.

July: Launch of the Stablecoin Regulatory Sandbox

The Hong Kong Monetary Authority has announced the first batch of participating companies in the stablecoin regulatory sandbox. Among them, a large technology company announced that it will issue a cryptocurrency stablecoin pegged to the Hong Kong dollar at a 1:1 ratio. This stablecoin is issued on a public chain and is backed by a reserve composed of highly liquid and trustworthy assets, held in independent accounts at licensed financial institutions. This move reflects Hong Kong's open attitude towards promoting financial technology innovation.

August: Launch of the Ensemble Project Sandbox

The Hong Kong Monetary Authority has launched the Ensemble project sandbox, aimed at promoting the application of tokenization technology in the financial sector. The first phase of the experiment covers four major themes: fixed income and investment funds, liquidity management, green finance, and trade supply chain financing. The Monetary Authority is working with the Securities and Futures Commission to promote the development of the tokenized asset market and enhance Hong Kong's position as an innovator in the global financial market.

October: New Chairman of the Securities Regulatory Commission Takes Office

The Chief Executive of the Hong Kong Special Administrative Region has appointed a new chairman of the Securities and Futures Commission, with a term of three years. The new chairman emphasized a commitment to fostering a sustainable and vibrant capital market, while protecting investors' interests, promoting economic growth, enhancing corporate governance, and stimulating innovation.

In the same month, the third virtual asset exchange in Hong Kong obtained a license. This exchange offers over-the-counter trading, trading platform, and custody services, focusing on security tokens and the tokenization of physical assets, promoting the development of Hong Kong's fintech ecosystem.

November: Launch of the Virtual Asset Index Series

Hong Kong Exchanges and Clearing Limited has officially launched a series of virtual asset indices, providing transparent and reliable benchmark prices for Bitcoin and Ethereum in the Asian time zone. This initiative aims to address the price discrepancies of virtual assets across global exchanges, offering investors a unified reference price.

In addition, a Hong Kong digital bank has announced that it is the first bank in Asia to provide cryptocurrency trading services for retail users, supporting Bitcoin and Ethereum transactions.

December: Improvement of Stablecoin Regulatory Framework

The "Stablecoin Regulation Draft" has been submitted for its first reading in the Legislative Council, stipulating that activities related to the issuance of fiat stablecoins, Hong Kong dollar stablecoins, or the promotion of stablecoins to the public must obtain a license. Key regulatory focuses include the robust management of reserve assets, the protection of holders' redemption rights, and requirements to combat money laundering.

In the same month, the Hong Kong Securities and Futures Commission issued licenses to four virtual asset trading platforms, raising the total number of licensed platforms to seven. The Commission also plans to establish a consultative group in early 2025 to strengthen the regulation of virtual asset platforms.

At the end of the year, a legislative member proposed the introduction of "Digital Connect", allowing mainland investors to buy and sell Hong Kong-recognized digital assets through a special channel to promote financial connectivity between the mainland and Hong Kong.

Overall, Hong Kong made significant progress in the virtual asset sector in 2024, laying a solid foundation for future development, from the improvement of regulatory frameworks to the launch of innovative products. Hong Kong is gradually becoming an important virtual asset hub in Asia and even globally.