The Evolution and Characteristics of Hong Kong's Virtual Asset Regulatory Framework

In recent years, the rapid development of virtual assets has posed new challenges to the global financial system and regulatory framework. As a major financial center in the world, Hong Kong's policy evolution in virtual asset regulation is worth noting. This article will systematically review the development trajectory of Hong Kong's virtual asset regulatory policies, aiming to provide readers with a comprehensive and clear understanding.

2017-2021: Initial Exploration and Risk Prevention

This stage marks the initial period of virtual asset regulation in Hong Kong, primarily focused on risk warnings, gradually introducing pilot regulatory measures. The regulatory attitude is transitioning from a cautious wait-and-see approach to an orderly and standardized one.

In September 2017, the Hong Kong Securities and Futures Commission issued a statement regarding initial coin offerings, laying the foundation for the classification of virtual assets. In December of the same year, the Commission required financial institutions to comply with existing financial regulations when offering cryptocurrency-related products.

In November 2018, the China Securities Regulatory Commission proposed to include eligible virtual asset trading platforms in a regulatory sandbox. In 2019, the CSRC defined security token offerings and made preliminary regulations on the responsibilities of intermediaries.

In November 2020, the Financial Services and the Treasury Bureau launched a consultation on amending the anti-money laundering regulations, planning to include virtual asset service providers in the licensing system. In May 2021, the results of this consultation officially confirmed the introduction of the licensing system.

During this period, the regulation of virtual assets in Hong Kong has begun to shift from simple risk warnings to specific behavioral norms, but it still adheres to the principle of "voluntary participation." The introduction of a regulatory sandbox mechanism provides a relatively relaxed testing environment for innovative projects.

2022: A Key Turning Point for Policy Transformation

In October 2022, the Financial Services and the Treasury Bureau released the first policy declaration on the development of virtual assets, marking a shift in regulatory thinking from "risk-oriented" to "opportunity-oriented." This change reflects Hong Kong's strategic consideration to maintain its status as a financial center and seize opportunities in the development of digital finance.

From 2023 to Present: Deepening and Implementation of Regulatory Policies

Since 2023, the regulation of virtual assets in Hong Kong has entered the operational implementation phase. A series of policy measures have been introduced:

• In June 2023, the Securities Regulatory Commission implemented guidelines for virtual asset trading platforms and initiated a mandatory licensing system.
• In the same month, the revised regulations on combating money laundering and terrorist financing came into effect, requiring virtual asset trading platforms to operate under a license.
• In August 2023, the first licensed exchange open to retail investors went live.
• In November 2023, the Securities Regulatory Commission issued a circular regarding activities related to tokenized securities.
• In December 2023, regulatory agencies jointly issued a circular regarding activities related to virtual assets, allowing the sale of virtual asset ETFs.
• In January 2024, the first issuance of tokenized securities subject to Hong Kong law.
• In March 2024, the Monetary Authority launched a project to integrate tokenized assets with wholesale central bank digital currencies.
• In July 2024, the regulatory sandbox program for stablecoins will be launched.
• In February 2025, the first tokenized fund aimed at retail investors was approved.
• In March 2025, the number of licensed exchanges increased to 10, and regulatory agencies released a roadmap for deepening market development.

Characteristics of the Regulatory System in Hong Kong

Hong Kong adopts a "sandbox regulatory" strategy based on the existing legal framework to regulate virtual assets by issuing guidelines or circulars. This approach reflects Hong Kong's regulatory concept of viewing virtual assets as an extension of traditional financial assets, primarily focusing on three core areas: financial compliance, anti-money laundering, and investor protection.

This regulatory strategy not only fully leverages Hong Kong's existing financial regulatory experience but also builds a bridge between financial institutions and emerging technology companies, facilitating the integration of institutional transformation and industrial development. The evolution of Hong Kong's virtual asset regulatory policy reflects its efforts to seek a balance between maintaining financial stability and promoting innovative development as an international financial center.