Hong Kong is poised to enhance its digital asset regulation within the next 18 months, marking a significant step in its mission to become a global hub for financial technology.

At the Foresight 2024 annual summit, David Chiu, a Legislative Council of the Hong Kong Special Administrative Region (Technology and Innovation) member, outlined the city's strategic plans to attract technology talents, build new infrastructure, and establish robust legislative supervision.

Establishing Robust Digital Asset Framework

Chiu said the initiative will be key for Hong Kong's technology industry over the next five to ten years.

"The digital asset industry has made significant progress in the past few years, but we are still in a very early stage," Chiu said. "We should establish a sound exchange system and soon introduce legislation related to stablecoins."

Stablecoins, a type of cryptocurrency pegged to stable assets like fiat currencies, are expected to be introduced in Hong Kong by the end of this year.

According to Chiu, sandbox tests have already been carried out, and the government aims to enhance the supervision and enforcement of legislation related to digital asset financial products within one to one and a half years. The next phase will encourage project parties to explore more innovative financial products in Hong Kong.

Stablecoin Sandbox

The Hong Kong Monetary Authority (HKMA) recently announced the first stablecoin issuer sandbox participants, which include a company linked to a significant Chinese e-commerce retailer, a local fintech firm, and a coalition of Standard Chartered Bank, Animoca Brands, and Hong Kong Telecommunications.

Jingdong Coinlink Technology Hong Kong Limited, a subsidiary of JD Technology Group, is among these participants and plans to issue a 1:1 stablecoin linked to the Hong Kong dollar (HKD). However, the company has clarified that inclusion in the sandbox does not equate to endorsement or licensure to issue stablecoins.

Pro-Crypto Financial Approach

This planned stablecoin legislation underscores Hong Kong's pro-crypto financial approach, aiming to foster innovation while ensuring regulatory oversight. On July 23, CSOP Asset Management, one of China's largest asset managers, launched Asia's first Bitcoin BTC futures inverse product in Hong Kong.

The CSOP Bitcoin Future Daily (-1x) Inverse Product (7376.HK) follows the successful launch of the firm's Bitcoin Futures ETF (3066.HK) in December 2022.

"We should establish a sound exchange system and soon introduce legislation related to stablecoins," Chiu said.

Hong Kong's strategic plans reflect its ambition to become a leading player in the global fintech industry.

The city's proactive steps in enhancing its digital asset regulations and fostering a supportive environment for innovation will likely attract significant attention and investment from the global tech community.