Renewed Era of Crypto Assets Growth in Hong Kong

By Jay Lee

Recently, Hong Kong, through its Financial Services and the Treasury Bureau, pronounced a Policy Statement on Development of Virtual Assets (“VA”) in Hong Kong (the “Policy Statement”), which sets out the government’s vision and next steps to help grow Hong Kong’s VA sector again.  Hong Kong hopes to develop “a vibrant sector and ecosystem” for VA in the future.  The positions set forth in the Policy Statement are widely welcomed by market participants, who hope it will attract more talented crypto-related businesses back to Hong Kong.

The government also recognizes the potential of “distributed ledger technology” and “Web 3.0” to become the future of “finance and commerce” industries.  It seems to envision that, with proper regulation, these technologies will enhance efficiency and transparency in the industries.

As key highlights of the Policy Statement, Hong Kong will explore a few pilot projects to assess “the technological benefits produced by virtual assets and their further applications in the financial markets”.  A couple of noteworthy projects that the government intends to test include:

  • Green bond tokenization: The Hong Kong government’s green bond issuance can be tokenized for institutional investors to purchase them. 
  • e-HKD (Hong Kong Central Bank Digital Currency (“CBDC”)): The government sees e-HKD as “the potential backbone and anchor bridging legal tender and VA” which may help the financial market with price stability and confidence instillation.

Green bond tokenization

Tokenization of bonds or other debt capital markets products may improve the efficiency and reduce the time and cost of related issuance and settlement processes significantly.  It is known that the government, along with the Bank for International Settlements Innovation Hub Hong Kong Centre, successfully developed “two prototypes (utilizing ‘permissioned’ and ‘permissionless’ blockchain) to concept-test the use of distributed ledger technology to streamline green bond retail issuance”.   It is currently known that the Hong Kong Monetary Authority, the de-facto central bank in Hong Kong, is working on a pilot project tokenizing Hong Kong government’s green bond issuance which may help facilitate developments of tokenized securities market in Hong Kong.  If tokenized green bonds are successfully issued by the government, it may open doors for similar future issuances of not just green bonds but also other conventional bonds in tokenized form.


Cryptocurrencies or other VAs cannot currently serve as legal tender in Hong Kong.  However, the government and the regulators are exploring a launch of the retail Central Bank Digital Currency, so called e-HKD.   e-HKD may have a big potential to make payments more efficient and much faster. The significance and value of e-HKD may lie in its potential to serve as the “backbone and anchor bridging legal tender and VA” and therefore may create the price stability and confidence in digital or crypto currencies which are needed to facilitate “more innovations around security token offerings based on different types of assets” in the future.

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