Hong Kong to Propose Statutory Licensing Regime for VASPs: CE John Lee

Chief Executive of HKSAR John Lee delivered his first policy address Wednesday, indicating that the administration has proposed a bill to establish a statutory licensing regime for virtual asset service providers.

In his first policy address to the Legislative Council, John Lee, the leader of Hong Kong, who took over the authority in July as the successor of Carrie Lam, expressed his stance towards virtual assets regulation and the outlook as well as the development in terms of digital Hong Kong dollars, according to the latest published policy address.

Speaking of virtual assets among various issues, Lee said:

“On virtual assets, the Government has introduced a bill to propose establishing a statutory licensing regime for virtual asset service providers. The Hong Kong Monetary Authority (HKMA) is examining market feedback on the regulation of stablecoins and will ensure that the regulatory regime is in line with both the international regulatory recommendations and the local context.” 

Currently, only one licensed virtual asset trading platform, OSL, is listed on the Securities and Futures Commission (SFC) as of August 2022; while another private company, Hashkey Group, secured Approval-in-Principle in April to operate a licensed virtual asset trading platform from the SFC in Hong Kong, which received type 9 asset management license by SFC of Hong Kong in September, enabling them to manage a portfolio of virtual assets fully.

Michel Lee, Executive President of HashKey Group, spoke to Blockchain.News after the policy address, saying that "we expect the government to set out additional licensing regimes to entice more digital asset companies and firms to apply for SFC’s licences and become regulated players in Hong Kong." 

"These policies should in turn make Hong Kong the market-of-choice for these Web3 and blockchain-facilitated technology companies for legal and compliant capital and liquidity markets for their underlying economies."

The Executive President added that the local blockchain community and market participants have been looking forward to a clearer regulatory framework on virtual assets in the city to regain its position as a major global virtual asset and Web3 hub, in the hope that to get it done by this year.

Previously, Lee's deputy, Financial Secretary Paul Chan, disclosed to address the policy statement related to digital assets during the upcoming Fintech Week by the end of October.

Hong Kong remains struggling for the recovery and revival of the economy amid the pandemic of COVID-19, facing strong competitors regionally and globally as well. The city has joined other global countries to study the adoption of digital currency to boost the economy and its currency in the long term.

The policy address reads that the HKMA has also begun the preparatory work for issuing "e-HKD" and is collaborating with the Mainland institutions to expand the testing of "e-CNY" as a cross-boundary payment facility in Hong Kong.

Lee's policy implementation comes after his speech in July, pledging to explore central bank digital currency in terms of retail level (rCBDC) and escalating the scenario for the application of mBridge initiative, a collaborative CBDC project between HKMA and the central banks of Thailand, China, the United Arab Emirates and the BIS to enhance multi-currency cross-border payments.

Over 600 Fintech companies in the city, according to statistics from the government.

The administration said "it is vigorously promoting Fintech by encouraging more Fintech services and products to undergo proof-of-concept trials, taking forward cross-boundary Fintech projects and nurturing Fintech talents."