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Hong Kong Edges Out Competition with Fintech-Friendly Environment

HONG KONG - The city’s competitive advantage in the financial technology (fintech) sector has taken a significant leap forward, thanks to a series of initiatives by the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC).

Fintech Promotion Roadmap

According to the latest “Fintech Promotion Roadmap”, released earlier this year, the HKMA has outlined five key pillars for development:

  • Adoption of fintech solutions across Hong Kong’s banking industry
  • Expanding the fintech-savvy workforce
  • Enhancing data infrastructure

Legislative Advantages

Hong Kong’s legal system provides a favorable environment for the virtual asset (VA) industry. Cryptocurrencies have been recognized by Hong Kong courts as “property” that can be subject to a trust in a liquidation context. The courts have also granted freezing injunctions over cryptocurrencies as asset preservation measures.

Robust Regulatory Regime

While some may argue that the existing licensing regime is too stringent, it sets out detailed criteria for applicants’ financial resources, management and governance structure, VA token admission requirements, client assets custody, and anti-money laundering and counter-terrorist financing policies. This robust regulatory environment gives credibility to businesses that commit to compliance and boosts investor confidence.

Growing Interest

Despite the challenges, there are still 17 would-be Virtual Asset Trading Platforms (VATPs) waiting to be licensed. Traditional financial institutions interested in VA distribution or fund management should take note of recent moves by the HKMA and SFC.

Expanding VA Market

The HKMA and SFC have issued a joint circular on intermediaries dealing with VAs, expanding the way for brokers, advisors, and fund managers to provide VA-related services. Additionally, most VA-related products are likely to be considered as complex products, requiring distributors to comply with existing requirements for sales of complex products.

Boost for Retail Investors

Retail investors can trade VA-related products traded on the Hong Kong Stock Exchange and some other specified exchanges, as well as VA funds authorized by the SFC for public offering. This should be a major boost to the VA markets in Hong Kong.

Conclusion

Hong Kong’s determination to foster a vibrant ecosystem for VAs, innovative products, and those that distribute, manage, and invest in them has positioned the city at the forefront of this global market. With its competitive advantages, Hong Kong is well-placed to reap the rewards in the coming years.