As the high-profile FinTech Week has wrapped up, the local media are reporting that Hong Kong is “roaring back”. The highly expected eventful week is relevant not only for the industry but for the special administrative region as a whole. The city, with the rolling-out of the new policies, is positioned to reap tangible growth from the intangible valuables, aka digital assets. The week is game-changing: New regulations in the financial sector were introduced, and multipronged approaches were adopted to facilitate virtual transactions that will bestow on Hong Kong its well-deserved vigor and vitality.
FinTech Week, the first major event since the outbreak of the COVID-19 pandemic, was highlighted by the Global Financial Leaders’ Investment Summit during the week and the Hong Kong Sevens three-day rugby tournament, beginning today.
Hong Kong is back. Some believe that the city has resumed “the good old days” of being one of the world’s most important financial centers. More precisely speaking, I believe that the special administrative region opened a new era of heralding digital financial services in the world through the eventful week.
The conference attracted 20,000 attendees and 3 million online viewers, and it was presented by InvestHK and by the Financial Services and the Treasury Bureau (FSTB), with Finoverse (previously known as Finnovasia) the appointed event organizer. Deeper financial institution-fintech collaborations across the ecosystem are taking shape.
Eddie Yue Wai-man, chief executive of the Hong Kong Monetary Authority (HKMA), highlighted creating a commercially viable arrangement for technology adoption, such as the development of commercial data interchange (CDI) for Hong Kong’s data infrastructure. Yue was right to say that “many exciting developments are taking place in Hong Kong over the past four years, and you are bound to see interesting sights and meet interesting people on the way”.
Julia Leung Fung-yee, deputy CEO of the Securities and Futures Commission (SFC), shared that the metaverse and non-fungible tokens (NFTs) are reshaping our lives, while the digital-assets ecosystem is building institutional grade infrastructure, such as well-established custodians. This development inspired the SFC to be more supportive of Distributed Ledger Technology (DLT) projects and digital asset service providers.
Moreover, I had the huge pleasure to be a speaker in a panel called “Virtual Assets: Preparing for a Regulated Future”.
In that panel, I emphasized the need for the DeFi (Decentralized Finance) industry to be regulated, since the right regulations and effective governance protect investors, prevent fraudulent activity within the DeFi ecosystem, and provide clear guidance to allow companies to innovate in the crypto economy. I also emphasized the need for an internationally coordinated approach, given that governments, central banks and other financial regulators are limited to the specific territory of their jurisdiction, but the digital space is global; therefore, a coordinated approach will be necessary.
In this regard, Hong Kong is exceptionally applaudable in approaching virtual assets. To me, probably the most relevant announcement made during Hong Kong FinTech Week was the announcement regarding cryptocurrencies and other virtual assets: Hong Kong will allow exchanges and other intermediaries to sell assets directly to retail investors. This change comes four years after the city limited exchanges to serving only those with portfolios of HK$8 million ($1.02 million) or more, who are considered as professional investors, thus excluding retail investors.
The FSTB, in its Policy Statement on Development of Virtual Assets in Hong Kong, recognizes the potential of DLT 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 issuance in our market, the presence of metaverse developers, and the use of DLT in trade, finance, etc. Further opportunities can be realized if we cast our sight further on more use cases, e.g., trading arts and collectibles, tokenizing vintage goods, or in the case of financial innovations, tokenizing a wide spectrum of products such as debt securities”.
The Legislative Council is currently reviewing Hong Kong’s new virtual-asset service provider licensing regime as part of proposed amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. The regime is set to come into effect on March 1. The SFC will conduct a public consultation on how retail investors may be given a “suitable degree of access to virtual assets” to licensed exchanges.
Hong Kong’s pivoting toward a friendlier regulatory regime for cryptocurrencies shows that it is ready to become an even more important virtual assets center/crypto hub, and that the “one country, two systems” principle is working perfectly.
It also demonstrates Hong Kong’s commitment and determination to explore financial innovations together with the global virtual assets community.
This announcement is consistent with the HKMA’s Fintech 2025, its strategy unveiled in 2021 and aimed at encouraging the financial sector to adopt fintech comprehensively by 2025, and also, as per the words of HKMA chief Eddie Yue, to “promote the provision of fair and efficient financial services” for the benefit of Hong Kong residents and its economy.
In addition, Fintech 2025 is aligned with the national 14th Five-Year Plan (2021-25) and the Long-Range Objectives Through the Year 2035, which recognized Hong Kong’s economic potential at the national level.
To sum up, Hong Kong FinTech Week has been an event that is important not just for members of the fintech industry like me, but for the whole of Hong Kong, since it is the first massive event celebrated physically in the city since the pandemic started, thus opening a new era of Hong Kong reopening again to the world, and also because of announcements like the one made by the FSTB through its Policy Statement on Development of Virtual Assets in Hong Kong, which has the potential to strengthen Hong Kong’s role as a fintech and virtual-assets hub.
The author is a fintech adviser, a researcher and a former business analyst for a Hong Kong publicly listed company.
The views do not necessarily reflect those of China Daily.