Initially,
Hong Kong adopted an opt-in scheme for virtual asset exchanges in 2019,
with licenses not being mandatory. However, only one exchange chose to
obtain a license from the Securities and Futures Commission (SFC).
Presently, all virtual asset exchanges are required to have a license,
covering cryptocurrencies such as Bitcoin, Stablecoins, and government
tokens. They can only offer services to professional investors and not
to the retail market. The regulators in Hong Kong are focused on
creating a more cautious and deliberate approach towards nurturing
institutional adoption as well as minimizing rampant retail speculation.
The government is also granting an opportunity for intermediaries and
banks to work with licensed exchanges for offering virtual asset dealing
services. The regulatory environment is favorable towards the entire
virtual asset value chain in Hong Kong, encompassing tokenization,
issuance, financing, asset management, and custody. For deepening
institutional participation in cryptocurrency, involvement from retail
investors, possibly through exchange traded funds (ETFs), is necessary.
Mr. Quinlan highlighted the importance of creating innovative financial
products that allow asset managers to allocate funds to cryptocurrencies
and fulfill their fiduciary duty. Tokenization is expected to play a
crucial role in bringing traditional assets such as bonds, equities, and
real estate into the digital paradigm.