Hong Kong’s Financial Services and the Treasury recently provided a response to the region’s Legislative Council regarding the status of Bitcoin (BTC) and other digital assets in light of increasing global interest. The Legislative Council, led by Johnny Ng, had posed several questions to the financial regulator to gain insight into Hong Kong’s approach to digital currencies amidst their growing popularity and price surges.
The first question raised by the Legislative Council aimed to determine whether the government planned to enhance the legal framework for digital assets in Hong Kong, emphasizing the need for expedited improvements in the regulatory regime. Additionally, the council sought clarification on the potential inclusion of digital currencies in Hong Kong’s fiscal and strategic reserves and the implications this might have on the economy.
Joseph Chan, Acting Secretary for Financial Services and the Treasury, addressed the queries raised by the Legislative Council by highlighting the government’s proactive stance towards regulating digital currencies. Chan mentioned that Hong Kong had adopted the Financial Stability Board’s recommendations for digital currency regulations and updated local rules accordingly. The government’s policy statement in October 2022 affirmed that digital currencies would be treated as traditional financial instruments, subject to the same regulations governing traditional financial activities.
Furthermore, Chan disclosed that amendments had been made to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance to establish a new licensing regime for virtual asset service providers (VASPs) and provide clear guidelines for stablecoin operations. While the government decided against creating a new regulatory authority for digital assets, a Task Force was established in 2023 to oversee the implementation of digital asset regulations in Hong Kong.
Regarding the possibility of adding digital assets to Hong Kong’s reserves, Chan mentioned that while the Exchange Fund had not yet considered investing in digital assets like BTC, it remained a potential future asset class for the region. In the meantime, Hong Kong’s focus would be on supporting asset tokenization and providing guidance to ecosystem participants interested in entering the digital asset space.
In contrast, South Korea’s progress in digital asset regulation has been hindered by the imposition of martial law, which has diverted attention away from critical reforms. The authorization of securities token offerings (STOs) and the introduction of real-name corporate digital asset accounts have been delayed, with experts projecting that these initiatives may not come to fruition until 2025.
Despite passing a tax reform bill that deferred digital asset taxation until 2027, South Korea’s digital asset ecosystem remains in a state of uncertainty due to the political crisis triggered by martial law. The administration’s focus on stabilizing traditional markets has sidelined digital asset regulations, leaving stakeholders in limbo.
As South Korea navigates its political turmoil and strives to regain stability, the future of digital asset regulation in the country remains uncertain. The delayed implementation of key reforms underscores the challenges faced by regulators in balancing political exigencies with the evolving landscape of digital assets.