Hong Kong's Leap Towards Global Standards

Two top-level Hong Kong financial regulators have co-announced their intent to adopt reporting requirements set by the European Securities and Markets Authority (ESMA) for crypto over-the-counter (OTC) derivatives.

On Sept. 26, the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) shared a plan to raise their OTC reporting requirements to global standards after studying responses to a consultation paper from March 2024.

According to Hong Kong stakeholders and investors, crypto OTC derivatives investments cannot be classified under the existing five traditional asset classes- interest rates, foreign exchange, credit, commodities, and equities.

Some stakeholders recommended using Digital Token Identifiers (DTI) "to identify crypto-asset underliers for OTC derivatives unambiguously."

Keeping Up Global Competition with European Standards

In response, the HKMA and SFC noted that ESMA implemented DTI in reporting in October 2023. DTI is the core reference point for crypto asset service providers across Europe.

Citing the need for the Unique Product Identifier (UPI) in reporting transactions, the Hong Kong regulators revealed plans to replicate the mandate in their jurisdiction shortly:

"Given that the Digital Token Identifier has been included in the data field 'Underlier ID (OTHER)' as an allowable value in the upcoming consultation of version 4 of the CDE Technical Guidance, we will accommodate the use of DTI in our reporting requirements."

However, the authorities will continue to monitor the outcome of mandates placed by other jurisdictions and adopt a similar regime as deemed necessary.

New Reporting Requirements in Hong Kong Expected by 2025

The Hong Kong authorities recommended implementing the new reporting requirements by Sept. 29, 2025. Hong Kong recently marked a new milestone in developing its in-house central bank digital currency (CBDC), the digital Hong Kong dollar (e-HKD). On Sept. 23, HKMA announced the launch of the second phase of the e-HKD pilot study, Project e-HKD+.

Project e-HKD+ will focus on three themes: settlement of tokenized assets, programmability, and offline payments. The new phase will have its sandbox and last about a year.