On June 26, the Hong Kong Special Administrative Region government unveiled the Hong Kong Digital Asset Development Policy Declaration 2.0—a forward-looking roadmap designed to solidify the city’s position as a global hub for digital assets. This updated declaration builds on the Securities and Futures Commission’s (SFC) February launch of the ASPIRe roadmap, which introduced new regulatory frameworks for over-the-counter virtual asset trading and custody services.
The Policy Declaration 2.0 introduces a comprehensive framework named LEAP, focusing on four core pillars: Legal and regulatory streamlining, Expanding the suite of tokenised products, Advancing use cases and cross-sectoral collaboration, and People and partnership development. Together, these initiatives aim to create a trusted, sustainable, and economically integrated digital asset ecosystem.
Optimizing Legal and Regulatory Frameworks
At the heart of Hong Kong’s strategy is a commitment to robust investor protection through a unified and comprehensive regulatory regime.
Unified Oversight for Digital Asset Service Providers
The government has proposed that the Securities and Futures Commission (SFC) serve as the primary regulator for digital asset trading service providers and custody service providers, responsible for licensing, registration, standard-setting, and regulatory optimization. Meanwhile, the Hong Kong Monetary Authority (HKMA) will continue to supervise banks engaging in digital asset-related activities, ensuring alignment with existing financial regulations.
A public consultation on the licensing mechanisms for these service providers is expected soon, marking a critical next step toward formalizing market participation rules.
Alignment with Global Regulatory Standards
To ensure international interoperability, Hong Kong will maintain compliance with key global standards, including:
- IOSCO’s Policy Recommendations on Crypto and Digital Asset Markets
- FSB’s Regulatory Framework for Global Crypto-Asset Activities
- Basel Committee’s Prudential Treatment of Crypto-Asset Exposures
- OECD’s Crypto-Asset Reporting Framework for tax transparency
This alignment reinforces Hong Kong’s credibility as a transparent and compliant financial center.
Reviewing Tokenization Laws and Processes
The Financial Services and Treasury Bureau (FSTB) and HKMA are leading a review of legal and regulatory frameworks to support broader tokenization adoption. Initial efforts will focus on the bond market, where pilot projects have already demonstrated feasibility. The review will assess settlement processes, registration requirements, and record-keeping standards to streamline end-to-end tokenized bond issuance and trading.
Expanding the Suite of Tokenized Products
Hong Kong is moving aggressively to diversify its digital asset offerings, bridging traditional finance with blockchain innovation.
Institutionalizing Tokenized Government Bonds
Following two successful issuances totaling approximately HK$6.8 billion in tokenized green bonds, the government plans to routinize tokenized sovereign debt issuance. This move not only modernizes public financing but also sets a benchmark for private-sector adoption.
Real-World Asset (RWA) Tokenization
The HKMA’s Ensemble project is paving the way for tokenizing real-world assets and financial instruments. Ongoing initiatives include:
- Tokenized money market funds and other investment vehicles
- Interbank settlement of tokenized deposits via a shared infrastructure
- Integration of tokenization and physical asset tracking in commodity warehousing
With the London Metal Exchange now recognizing Hong Kong as an approved delivery location, the government encourages the use of blockchain for transparent tracking of metals and minerals.
Strategic Expansion into New Sectors
Future applications will target high-value sectors such as:
- Precious metals (e.g., gold)
- Industrial metals
- Renewable energy assets (e.g., solar panel revenue streams)
These efforts aim to unlock liquidity in traditionally illiquid markets through fractional ownership and automated settlements.
Tax Incentives and Market Neutrality
To boost institutional participation:
- The stamp duty exemption applicable to ETF transfers on the Hong Kong Stock Exchange now extends to tokenized ETFs
- Legislative proposals will allow specified digital assets to qualify for profits tax exemptions under private fund and family investment control vehicle regimes, effective from the 2025/2026 tax year if approved
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Advancing Use Cases and Cross-Sector Collaboration
Beyond infrastructure, Hong Kong is fostering innovation through practical applications and ecosystem partnerships.
Stablecoin Regulation Launching in 2025
A major milestone: Hong Kong will implement its stablecoin issuer regulatory regime on August 1, 2025. The framework will mandate strict requirements around:
- Reserve asset management
- Price stabilization mechanisms
- Redemption processes
- Prudential risk controls
Market participants are invited to submit proposals on how licensed stablecoins can be tested and deployed in real-world scenarios—particularly as payment solutions.
Strengthening Ecosystem Partnerships
Digital港 (Cyberport) will play a central role by:
- Hosting accelerator programs focused on Web3 and digital assets
- Offering business matching, technical support, and expert mentorship
- Launching a Blockchain and Digital Asset Pilot Funding Scheme to support high-potential projects
Additionally, InvestHK stands ready to assist digital asset firms in establishing or expanding operations in Hong Kong.
Building Transparent Market Infrastructure
Hong Kong Exchanges and Clearing Limited (HKEX) has launched its first suite of digital asset indices, providing reliable Bitcoin and Ethereum price benchmarks within the Asian time zone—critical for institutional-grade investment products.
The government also encourages development of homegrown regtech, cybersecurity tools, and monitoring solutions tailored to digital asset markets.
Talent and Partnership Development
Long-term success hinges on human capital and global cooperation.
Cultivating a Skilled Workforce
Cyberport will help build a stable pipeline of professionals skilled in:
- Blockchain development
- AI integration
- Digital asset innovation
Collaborations between universities and industry will drive joint research in areas like:
- Next-generation blockchain applications
- Tokenization frameworks
- AI-powered financial analytics
Enhancing Regulatory Coordination
The government will strengthen coordination among local regulators and law enforcement agencies while actively participating in international regulatory dialogues—ensuring Hong Kong remains aligned with global best practices.
Frequently Asked Questions (FAQ)
Q: What is the LEAP framework in Hong Kong’s digital asset policy?
A: LEAP stands for Legal streamlining, Expanding tokenized products, Advancing use cases, and People development—a four-pillar strategy to build a sustainable digital asset ecosystem.
Q: When will Hong Kong regulate stablecoin issuers?
A: The stablecoin regulatory regime takes effect on August 1, 2025, covering reserve management, redemption, and risk controls.
Q: Are tokenized ETFs subject to stamp duty in Hong Kong?
A: No. Transfers of tokenized ETFs are exempt from stamp duty, aligning them with traditional ETFs listed on HKEX.
Q: Will there be tax benefits for digital asset funds?
A: Proposed legislation would extend profits tax exemptions to certain digital asset transactions in private funds and family offices, starting in 2025/2026 if passed.
Q: How is Hong Kong supporting real-world asset tokenization?
A: Through initiatives like the HKMA’s Ensemble project, support for commodity tracking, and plans to tokenize assets like gold, industrial metals, and renewable energy revenues.
Q: Who regulates digital asset exchanges in Hong Kong?
A: The Securities and Futures Commission (SFC) is proposed as the main regulator for licensing and oversight of trading and custody service providers.
This strategic update underscores Hong Kong’s ambition to lead in the global digital economy. By combining clear regulation, innovative product development, cross-sector collaboration, and talent investment, the city is positioning itself at the forefront of the tokenized future.