Hong Kong’s FinTech Week 2024 kicked off on Monday with an emphasis on digital assets, asset tokenization and cross-border payment infrastructure.

“The government of the Hong Kong Special Administrative Region will take a balanced and proportionate regulation approach to promote the long-term sustainable and healthy development of the digital asset industry,” Financial Secretary Paul Chan Mo-po said in his opening  remarks.

“We have issued three digital asset operator licenses so far since we have put in place a licensing regime last year for digital asset trading platforms. We expect more licenses will be issued in the next couple of months,” Chan noted.

The finance chief added that the government plans to introduce legislation for stablecoins this year, following the Hong Kong Monetary Authority’s (HKMA) introduction of a stablecoin issuer sandbox in March to allow interested parties to conduct testing and facilitate two-way communication on the proposed regulatory requirements.

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The administration is also reviewing the design of the regulatory framework for over-the-counter trading activities of digital assets. A second round of consultation will be conducted next year before introducing the licensing regime for virtual asset custodian service providers, Chan noted.

Secretary for Financial Services and the Treasury Christopher Hui Ching-yu added that   authorities are expected to regulate the product level of stablecoins by the end of this year, and will regulate them at issuer level next year.

On Monday, Hong Kong Exchanges and Clearing announced it will launch the HKEX Virtual Asset Index Series on Nov 15. The index series will support the development of the virtual asset ecosystem and reinforce Hong Kong’s role as an international financial center by offering real-time data and daily reference prices in the Asian time zone.

Eric Yip Chi-hang, intermediaries executive director at the Securities and Futures Commission (SFC), said the financial regulator is processing another 14 applications and it hopes to grant several more (digital asset operator) licenses before the end of the year.

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“The SFC will establish a formal advisory group for all (digital asset trading) licensed platforms early next year, with the goal of publishing a comprehensive white paper on virtual assets, outlining the development roadmap of products and services, and potential improvements in compliance and risk management. The SFC will continue to strengthen investor education in the virtual asset market,” Yip said.

In addition to digital assets, asset tokenization is another main theme of FinTech Week 2024.

“The HKMA is driving innovation in financial market infrastructure with Project Ensemble, exploring tokenization use cases facilitated by tokenized deposits and central bank digital currencies, in a bid to accelerate the development of the tokenization market in Hong Kong,” HKMA Chief Executive Eddie Yue Wai-man said.

Internationally, the HKMA has established new cross-border partnerships with the Central Bank of Brazil and the Bank of Thailand to explore cross-border tokenization use cases under Project Ensemble.

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The HKMA chief added that the authority has completed the initial phase of six tokenization use cases across four main themes under Project Ensemble and will publish a report detailing the results of the experiment in 2025.

“The government will soon issue the third batch of tokenized green bonds after it has issued two batches of tokenized green bonds. There is no definite timetable and further details are yet to be announced,” Yue said.

The HKMA has launched EvergreenHub, a knowledge repository where issuers, investors and other relevant market participants can reference the HKMA’s experience and related materials on the technological, legal and operational aspects of digital bond transactions as they navigate bond tokenization.

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The HKMA chief also said progress has been made in cross-border payment infrastructure. “The HKMA is working closely with the People’s Bank of China to establish a cross-boundary linkage between Hong Kong’s Faster Payment System and the Chinese mainland’s Internet Banking Payment System. This linkage will support all-day, instant, small-value, cross-boundary remittances using account proxies like mobile numbers, and a pilot launch is expected to be around mid-2025 tentatively.”