Hong Kong Declaration Overview: Aiming to Replace Singapore as the Crypto Assets Hub of Asia-Pacific?

Author | Wu Says Blockchain

On June 26, the Government of the Hong Kong Special Administrative Region issued the “Hong Kong Digital Asset Development Policy Declaration 2.0”, stating its firm commitment to building Hong Kong into a leading global digital asset center, a market that fosters innovation in a controlled risk environment, and brings substantial benefits to the real economy and financial markets, while being trustworthy.

The release of the Hong Kong declaration coincides with Singapore’s implementation of strict policies to drive away unlicensed institutions. Hao, CEO of Legend Trading, stated that over the next 2-3 years, Singapore’s influence on the Web3 industry will diminish. There are only 33 licensed companies in total, and about half of these have very little competitiveness in markets outside of Singapore. Some are merely subsidiaries of large groups, with licenses that only allow them to serve the Singapore market and can only operate in spot trading. Many founders of these companies will stay in Singapore for family reasons, but their teams will try to be based in other countries. Noted analyst Zheng Di indicated that the next Web3 center will be Hong Kong, which he is very optimistic about. Due to Temasek’s huge losses from investing in FTX, many people coming from Singapore do not necessarily need the crypto circle; Hong Kong will reclaim its status as the global center for Web3 because of Singapore’s actions.

The Hong Kong Declaration states that in order to achieve this vision and goals, a digital asset ecosystem that is deeply integrated with the real economy and financial markets, and oriented towards the future, will be created by proposing a series of strategic policy directions and implementing corresponding measures. When formulating policy directions and measures, we strive to ensure that they are not limited by current technologies and that they can adapt to the future development of digital assets, while integrating into the real economy and financial system to achieve sustainable growth. These measures are framed by “LEAP”, which includes: optimizing legal and regulatory streamlining; expanding the suite of tokenised products; advancing use cases and cross-sectoral collaboration; and people and partnership development, to build a trustworthy, innovative, and vibrant digital asset ecosystem, reinforcing Hong Kong’s leading position in the global financial landscape.

The declaration states that the next main measure is to conduct public consultations on the licensing mechanism for digital asset trading service providers and digital asset custody service providers, to meet investors’ demands for high liquidity, large transactions, and secure custody of assets. The government suggests designating the Securities and Futures Commission as the main regulatory body for digital asset trading service providers, responsible for licensing and registration matters, setting standards, optimizing regulatory processes, and reducing potential regulatory arbitrage under different digital asset regulatory frameworks. Meanwhile, the Hong Kong Monetary Authority will act as the frontline regulatory body for banks, overseeing their digital asset trading activities. The Securities and Futures Commission will serve as the main regulatory body for digital asset custody service providers, responsible for licensing and registration, as well as setting standards, while the Monetary Authority will act as the frontline regulatory body for banks, overseeing their digital asset custody activities.

The declaration states: The Treasury and the Monetary Authority will lead the review of relevant laws and regulatory frameworks, referencing international experience and practices, to promote the further application of tokenization in Hong Kong. The initial review will focus on the bond market that has already passed the proof of concept stage, and it is also expected to provide references for the tokenization of other real-world assets and financial instruments. We will conduct a comprehensive review of the issuance and trading processes of tokenized bonds, including but not limited to settlement, registration, and record-keeping requirements. The government will normalize the issuance of tokenized government bonds and explore arrangements in different currencies and maturities, as well as other innovative options. The government hopes to provide the market with stable and high-quality digital bonds through this initiative, further expanding accessibility and attracting a broader investor base. To further leverage the advantages of tokenization, the Treasury and the Monetary Authority will continue to communicate with industry experts to understand various market perspectives, including the incorporation of digital currencies to enhance trading efficiency, scenarios for secondary market trading applications, and further expanding investor participation in the local bond market. The government aims to establish a global benchmark by being the first to issue tokenized bonds and normalizing them, enhancing market confidence in the technology while encouraging adoption by the public and private sectors.

The declaration states: All exchange-traded funds (ETFs) currently listed on the Hong Kong Stock Exchange are exempt from stamp duty when transferred. To promote the development of the tokenized market, the government will clarify that these stamp duty exemptions also apply to tokenized ETFs. Based on this exemption, the government welcomes market participants to explore the advantages of tokenizing ETFs, such as money market ETFs, including bringing them into licensed digital asset trading platforms or other platforms for secondary market trading. Looking ahead, the government will maintain an open attitude, considering factors such as fiscal impact and market development, to review the tax arrangements for other Securities and Futures Commission-recognized funds after tokenization. The government will submit legislative proposals to include specified digital assets in the private placement of funds and family investment vehicles that qualify for profits tax exemptions. If the proposals are passed by the Legislative Council, the tax exemptions will take effect from the 2025/2026 tax year.

The declaration states that it will support stablecoins and other tokenized projects, including exploring the use of stablecoins as payment tools. To fully realize the potential of stablecoins, the government and regulatory agencies will provide a favorable market environment and necessary regulatory guidance to promote the research and implementation of licensed stablecoin issuers in Hong Kong to different application scenarios, addressing substantial pain points in economic activities. To demonstrate government support and take a leading role, we welcome market participants to propose suggestions on how the government can experiment with and utilize licensed stablecoins, such as for improving the efficiency of government payments.

The declaration states that Cyberport will also launch a pilot funding program for blockchain and digital assets, providing funding for application projects with future application potential, iconic significance, and market impact. In addition to funding, Cyberport will also assist these companies and coordinate with relevant stakeholders to support the implementation of pilot projects as needed. The dedicated team of the Invest Hong Kong is welcoming and ready to support digital asset service providers in establishing and expanding their businesses in Hong Kong. Among the many available supports, the Invest Hong Kong can help potential digital asset service providers connect with banks and various professional and support services, facilitating their business establishment.

National Committee of the Chinese People’s Political Consultative Conference member and Hong Kong Legislative Council member Wu Jiezhuang interprets that the declaration clearly demonstrates the replacement of virtual assets with digital assets as terminology, aligning with international standards, and emphasizes its innovative leadership as an international financial center in the digital age; the goal is very clear, which is to balance innovation with risk control and attract high-quality global institutions; and to enhance the efficiency of the financial market through technologies such as tokenization, serving the real economy; it clarifies the division of labor, with the Securities and Futures Commission leading the issuance of licenses for digital asset trading and custody services, while the Monetary Authority regulates banking-related activities to avoid functional overlap; it showcases the government’s friendliness and recognition of digital assets, and the government will submit legislative proposals to include digital assets in privately offered funds and family investment control tools to enjoy profits tax exemptions for qualified transactions. At the same time, the SAR government will practice by regularizing the issuance of tokenized government bonds; genuinely reducing operational costs in the industry and striving to improve market liquidity, the government will clarify how the stamp duty exemption measures for ETF transfers will also apply to tokenized ETFs, which has profound implications for the digital asset industry; substantial cash support will improve the market ecosystem, and Cyberport will launch a blockchain and digital asset pilot funding scheme, which can not only attract more talents to join the industry but also enhance the overall project pool in Hong Kong; in summary, Hong Kong has a great opportunity to become a benchmark for compliant innovation in digital assets in Asia within 3-5 years, providing a Hong Kong solution for the integration of global traditional finance and the digital economy.

The Financial Secretary of Hong Kong, Paul Chan, stated: Digital assets are an important and highly promising part of financial technology. Through Blockchain technology, they enable more efficient and lower-cost financial transactions, making financial services more inclusive. The “Policy Declaration 2.0” showcases our vision for the development of digital assets and demonstrates the substantial applications of tokenization through practice, promoting the diversification of application scenarios. By combining prudent regulation and encouraging market innovation, we aim to build a more vibrant digital asset ecosystem that integrates with the real economy and social life, bringing benefits to the economy and society while reinforcing Hong Kong’s leading position as an international financial center.

The Secretary for Financial Services and the Treasury, Christopher Hui, stated that Hong Kong’s unique advantages give us a head start in promoting the traditional finance sector into the era of digital assets. The framework set out in “Policy Declaration 2.0” helps us move towards “LEAP” to form a trustworthy, sustainable, and deeply integrated digital asset ecosystem within the real economy. “Policy Declaration 2.0” also positions Hong Kong at the forefront of digital transformation, providing businesses and investors with a clear roadmap to navigate the robust and thriving digital asset market.

The Financial Secretary of Hong Kong, Paul Chan, accepted an exclusive interview with the Takungpao, stating that Hong Kong is optimizing laws and regulations, expanding product varieties, promoting cooperation in application scenarios, and nurturing talent as four major strategies to further build a full-chain ecosystem for digital asset development, pushing Hong Kong to become a strategic hub connecting the opportunities of China’s digital economy with the global financial innovation demands. He emphasized that digital assets are not only a breakthrough in financial technology but also a key lever for Hong Kong to consolidate its status as an international financial center. Hong Kong will advance the integration of virtual assets with the real economy through a dual-track approach of licensing management and scenario-based applications. “Regulating stablecoins is a priority; we require their use to be linked with real scenarios such as trade settlement and cross-border payments, eliminating speculation and hype.” Currently, Hong Kong has legislated to regulate the issuance of stablecoins, while the Securities and Futures Commission has issued licenses for virtual asset exchanges and is advancing custody regulation. At the same time, it provides an innovative testing space for the industry through “sandbox regulation.”

HashKey Group’s Chairman, Xiao Feng, stated to PANEWS that this declaration has three key changes, including: Regulation of stablecoins: A stablecoin licensing system will be officially implemented on August 1, 2025, making it one of the few jurisdictions in the world to provide a “landing pass” for stablecoins; RWA tokenization is viewed as a key industry: The government is not only promoting the regular issuance of bonds but also plans to include assets such as gold, green energy, and electric vehicles in the scope of tokenization; Tokenized ETFs and digital asset funds enjoy tax exemptions: If future legislation is passed, tokenized ETFs will enjoy the same stamp duty exemptions and capital gains tax exemptions as traditional ETFs, which signifies a rewriting of the rules of the financial market. These reforms signal that Hong Kong is not just supporting Web3, but aims to make Web3 a part of the financial infrastructure through its regulatory framework. The update of Hong Kong’s Web3 policies also completes a “trinity” of institutional closure: Regulatory certainty: Hong Kong will become the world’s first jurisdiction to clearly license digital asset custody services independently; Asset penetrability: Allowing real-world assets (metals, energy) to be tokenized on par with financial instruments (bonds, ETFs), breaking the boundary between virtual and real; Tax competitiveness: Tokenized ETFs are tax-free + capital gains tax exemption for digital asset funds.