Hong Kong authorities have prioritised making the region lucrative for Web3 businesses.
Hong Kong is focussing its policy work around virtual assets on protecting investors and consumers
Photo Credit: Unsplash/ Annie Spratt
Cryptocurrencies have made their mark on the fintech sector in several nations but have met with regulatory challenges because of the associated risks and volatile nature of the crypto market. Hong Kong is the latest to join the list of Asian regions that are accelerating efforts to establish a regulatory framework to oversee the crypto sector. The HKSAR Legislative Council, over the weekend, announced the setting up of a new subcommittee, that will dedicate its time to drafting detailed crypto laws.
Hong Kong authorities have prioritised making the region lucrative for Web3 businesses. After all, despite the financial risks involved with digital assets, the crypto market presently sits atop a valuation of $2.26 trillion (roughly Rs. 1,88,68,265 crore).
Johnny NG Kit-Chong, a member of the HKSAR, took to X to announce the creation of the crypto-focussed subcommittee. In his post, Kit-Chong disclosed that the subcommittee will explore regulations from two aspects – one regarding Web3 policies and the other around virtual assets.
From the point of view of Web3 policies, the subcommittee is tasked with balancing the growth of Web3 under a regulatory framework. The artificial intelligence (AI) sector will also be fostered by this newly formed body.
Policy work around virtual assets, meanwhile, will revolve around protecting investors and consumers that could lead to a boost in market confidence.
Other responsibilities assigned to the subcommittee, as per Kit-Chong, include assessing “potential application scenarios and risks of stablecoins in Hong Kong, and regulatory systems that ensure financial stability without stifling innovation.”
The body will also devote time to exploring the demand for professional custody services due to the rise of virtual assets in Hong Kong and conducting research around corresponding custody methods and regulatory measures.
The members of the committee are also inviting recommendations from the public, which they think can help them oversee Web3 elements like decentralised autonomous organisations (DAOs).
“I welcome suggestions from the global Web3 industry. I will study them in detail and summarise them to present to the government through the Legislative Council platform,” the HKSAR Legislative Council member said.
Hong Kong allows the trading and holding of cryptocurrencies, but no cryptocurrency is recognised as legal tender there. Crypto activities related to individual investors are not subject to taxes, however, firms indulging in professional crypto activities are subject to income tax.
As per Triple-a.io, over 2.45 lakh people, or 3.27 percent of Hong Kong's total population, currently own cryptocurrencies.
Last month, Hong Kong's Securities and Futures Commission (SFC) announced that it would be conducting checks to see if all crypto functional exchanges were adhering to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) on priority.
Prior to this in April, Hong Kong followed the US to approve ETFs related to Bitcoin and Ether, aiming to boost the engagement of institutional investors with these otherwise risky digital assets.
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