SFST's speech at Crypto Leaders Symposium, London Roundtable (English only)
17.11.2022

Following is the video speech by the Secretary for Financial Services and the Treasury, Mr Christopher Hui, at the Crypto Leaders Symposium, London Roundtable on Hong Kong as an International Financial Centre - Trends and Opportunities today (November 17): Ladies and gentlemen, It is my great pleasure to share with you all on how Hong Kong, as an international financial centre, can promote the sustainable and responsible development for virtual assets in our market. It is very timely for me to do so, as we have just published our policy statement on the development of virtual assets in Hong Kong. It sets out the Government's policy stance and approach towards developing a vibrant ecosystem for the sector. It also explains in detail our vision and approach, regulatory regimes, thoughts on investors' exposures, and our pilot projects to embrace the technological benefits and financial innovations brought about by virtual assets. Our policy stance on virtual assets is now clearly communicated to the global markets and it serves to demonstrate our commitment and determination to explore financial innovations together with the global virtual assets community. As an international financial centre, Hong Kong is open and inclusive towards the global community of innovators engaging in virtual assets businesses. The Government, in conjunction with the financial regulators, are working towards developing a facilitating environment for promoting sustainable and responsible development of the sector here in Hong Kong. We recognise the potential of distributed ledger technology and Web 3.0 to become the future of finance and commerce, and under proper regulation they are expected to enhance efficiency and transparency, which in turn will reduce or resolve existing frictions across clearing, settlement and payments. Hong Kong shows signs of a vibrant virtual assets ecosystem, as demonstrated by NFT (non-fungible token) issuance in our market, presence of metaverse developers, and use of DLT (distributed ledger technology) in trade finance etc. Further opportunities can be realised if we cast our sight further on more use cases, e.g. trading arts and collectibles, tokenising vintage goods, or in the case of financial innovations, tokenising a wide spectrum of products such as debt securities. We will put in place timely and necessary guardrails to mitigate actual and potential risks in line with international standards, so that virtual assets innovations can thrive in Hong Kong in a sustainable manner. We will adopt the "same activity, same risks, same regulation" principle, and put in place timely and necessary guardrails, so that virtual assets innovations can thrive in Hong Kong in a sustainable manner, while actual and potential risks on financial stability, consumer protection, as well as money laundering and terrorists financing can be mitigated and managed in line with international standards. Given our status of Hong Kong as an international financial centre and the global reach of virtual assets, we also need to monitor the international regulatory developments closely, which are gathering pace and momentum, and take them into account in the development of our regulatory system. On the part of regulation, our latest effort is to put together a licensing regime for virtual assets service providers. The new regime will align requirements for virtual assets exchanges in terms of anti-money laundering, counter-terrorist financing, and investor protection to those currently applicable to traditional financial institutions, hence offering licensed virtual assets exchanges the status and credibility to access a wider net of investors in the Hong Kong market. An additional benefit is that financial intermediaries and banks will be able to partner with licensed virtual assets exchanges when offering clients with dealing services, provided that relevant regulatory conditions are met. From the perspective of virtual assets exchanges, a licensing status will offer them the potential to open new distribution channels in Hong Kong, tapping into our sizable asset and wealth management market which is worth over US$4.5 trillion. And virtual assets exchanges can also further tap into our established financial markets through the connectivity with traditional financial institutions. As we step up our preparatory work for the new licensing regime, we are ready to engage with global virtual assets exchanges and invite them to set foot in Hong Kong for new business opportunities. With respect to investors' exposure to virtual assets, we recognise the increasing importance and acceptance of virtual assets as a vehicle for investment allocation by global investors, be they institutional or individual. While the Securities and Futures Commission (SFC) will be conducting a public consultation on how retail investors may be given a suitable degree of access to virtual assets under the new licensing regime, we note that retail investors in other markets have already been given exposure to virtual assets via virtual assets-related products such as Exchange Traded Products. Hong Kong is therefore open to the possibility of having Exchange Traded Funds on virtual assets in Hong Kong, and the SFC has published a circular on this. Having these products launched in Hong Kong will provide the connectivity between virtual assets players and traditional financial institutions, offering investors with well-designed products, hence promoting the overall growth of the sector in our market. That said, we will be careful and cautious about the risks to retail investors, and therefore will enhance investor education and ensure that suitable regulatory requirements and arrangements are in place. Last but not least, the Government and the regulators are exploring a number of pilot projects to test the technological benefits brought about by virtual assets and their further applications in the financial markets. They demonstrate our commitment and determination to explore financial innovations together with the global virtual assets community. The pilot projects include issuing NFTs for our flagship Hong Kong Fintech Week event, as a proof-of-concept project on our part to engage the fintech and Web3 community. Also, we will explore tokenising Government green bond issuance for subscription by institutional investors. Lastly, we will explore possible launch of our retail Central Bank Digital Currency, the eHKD. To the global virtual assets community, we believe the significance of e-HKD lies in its potential to serve as the "backbone" and anchor bridging legal tender and virtual assets, hence offering the price stability and confidence needed to empower more innovations around security token offerings based on different types of assets. Ladies and gentlemen, with Hong Kong's world class financial infrastructure, legal and regulatory regime, we aim to promote the sustainable development of financial services across the whole virtual assets value chain, covering issuance of virtual assets, tokenisation, trading and settlement platforms, financing and asset management, and custody etc. The Government is prepared to embrace the future of finance and commerce, supporting the underlying technologies of virtual assets and promoting their benefits in our market, and we welcome the clustering of fintech and virtual assets community and talents in Hong Kong. We sincerely invites the global virtual assets community to join hands with us and leverage on Hong Kong's status as an international financial centre to realise the potential of financial innovations under a clear, agile and facilitating regulatory environment, adhering to best international standards and practices. Thank you.