Analysis of Hong Kong's Virtual Asset Regulatory Policy Framework

In recent years, the rapid development of virtual assets has posed challenges to the traditional financial system and regulatory framework. The high volatility and leverage characteristics of virtual assets have raised a series of new issues for regulators and trading platforms, such as cross-border capital flow regulation, customer identity verification, and systemic financial risk prevention. These issues indicate that the regulation of virtual assets requires multi-party collaboration to address.

As the world's third-largest financial center, Hong Kong's policies on virtual asset regulation are particularly important. On one hand, Hong Kong needs to promote the development of the global virtual asset market, while on the other hand, it must meet the requirements for financial stability, seeking a balance between the international capital market and the financial security of the mainland. At the same time, Hong Kong is also an important window for China to explore emerging financial markets. Therefore, Hong Kong's path of virtual asset regulation is a process of continuously reconciling globalization and localization, innovation and stability.

2017-2021: From Risk Alerts to Institutional Prototype

This stage marks the beginning of virtual asset regulation in Hong Kong, primarily focusing on risk warnings, with a gradual introduction of pilot regulation. The regulatory attitude is transitioning from a prudent wait-and-see approach to an orderly and standardized one.

In September 2017, the Hong Kong Securities and Futures Commission issued a statement regarding ICOs, indicating that some ICOs may constitute securities and are subject to regulation.

In December 2017, the Securities Regulatory Commission required financial institutions to ensure that cryptocurrency-related products comply with existing regulations.

In November 2018, the Securities Regulatory Commission proposed including eligible virtual asset trading platforms in a regulatory sandbox.

In March 2019, the Securities Regulatory Commission defined STOs and stipulated the responsibilities of intermediaries.

In November 2019, the China Securities Regulatory Commission proposed a licensing system for virtual asset trading platforms, requiring platforms to voluntarily apply for licenses to be included in regulatory oversight.

In November 2020, the Financial Services and the Treasury Bureau conducted a consultation on incorporating virtual asset service providers into the licensing regime.

In May 2021, the Treasury Bureau confirmed the introduction of a licensing system for virtual asset service providers.

During this period, Hong Kong began to define the responsibilities of market participants and introduced the initial form of a licensing mechanism, but still adhered to the principle of "voluntary participation." The use of the regulatory sandbox mechanism reflects inclusiveness and practical significance.

2022: A Key Turning Point for Policy Transformation

In October 2022, the Treasury Bureau released its first policy declaration on virtual assets, clearly stating its intention to actively promote the development of the virtual asset ecosystem. This marks a shift in regulatory thinking from "risk-oriented" to "opportunity-oriented."

This shift is mainly due to two reasons: first, the intensifying international competition, which requires Hong Kong to maintain its status as a financial center; second, the development of virtual assets has created multiple demands, and Hong Kong can play a key connecting role. This is not only a response to the innovative financial market but also a proactive strategic choice for Hong Kong to maintain its status as a financial center.

From 2023 to present: Rapid iteration, deepening, and transformation of regulatory policies

Starting in 2023, the regulation of virtual assets in Hong Kong officially enters the "operational implementation" phase. A comprehensive and mandatory legal and licensing system gradually replaces the experimental model.

In February 2023, Hong Kong issued its first tokenized green bond.

In June 2023, the Securities Regulatory Commission officially implemented guidelines for virtual asset trading platforms and initiated a licensing system.

In the same month, the "Regulations on Combating Money Laundering and Terrorist Financing (" came into effect, requiring virtual asset trading platforms to operate with a license.

In August 2023, the first licensed exchange open to retail investors went live.

In November 2023, the Securities Regulatory Commission issued a circular regarding activities related to tokenized securities.

In December 2023, the Monetary Authority and the Securities and Futures Commission jointly issued a circular regarding activities related to virtual assets, allowing the sale of virtual asset ETFs.

In January 2024, the first issuance of tokenized securities applicable to Hong Kong law.

In March 2024, the Monetary Authority launched a project to explore the integration of tokenized assets with central bank digital currency.

In July 2024, the Monetary Authority launched a regulatory sandbox program for stablecoins.

In February 2025, the Financial Secretary announced the release of the second virtual asset policy declaration.

In February 2025, the first tokenized fund aimed at retail investors was approved.

In March 2025, the number of licensed exchanges will increase to 10, and the Securities Regulatory Commission will release a new regulatory roadmap.

This series of measures indicates that the regulation of virtual assets in Hong Kong is transitioning from "policy statements" to the "regulatory enforcement" stage, and the regulatory system is becoming increasingly完善.

Characteristics of the Hong Kong Regulatory System

Hong Kong adopts a "sandbox regulatory" strategy based on the existing legal framework, using guidelines or circulars to implement "patchwork" regulation of digital assets, rather than creating a new code of law from scratch.

The logic behind this strategy is:

1. Virtual assets are essentially similar to traditional financial assets and can be incorporated into the existing financial regulatory framework.
2. Hong Kong relies heavily on the financial sector and needs to safeguard the three lines of defense in financial compliance, anti-money laundering, and investor protection while seizing opportunities.
3. Financial practitioners in Hong Kong are familiar with traditional financial regulation, which can reduce the cost of regulatory coordination and promote the integration of institutional transformation and industrial development.

Overall, Hong Kong's regulatory strategy reflects its practical considerations as an international financial center, seeking a balance between innovation and stability.

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