Hong Kong has reasserted its ambitions to become a leading global center for digital assets with the release of its Digital Asset Development Policy Statement 2.0 on June 26. The updated declaration signals a bold strategic shift — one that positions Hong Kong not just as a regional player, but as a serious contender to surpass Singapore and lead the future of Web3 and tokenized finance in the Asia-Pacific region.
Backed by comprehensive regulatory reforms, tax incentives, and strong government support, Hong Kong is crafting a trusted, innovation-driven digital asset ecosystem deeply integrated with real-world finance. This move comes at a pivotal moment, as regulatory tightening in other jurisdictions creates space for new leadership.
A Strategic Shift: From Virtual to Digital Assets
One of the most notable changes in the updated policy is the deliberate shift in terminology — from “virtual assets” to “digital assets.” This subtle but significant change aligns Hong Kong with international standards and underscores its intent to treat blockchain-based assets as legitimate financial instruments, not speculative novelties.
As Legislative Council member and CPPCC National Committee member Ng Kit-chung explained, this rebranding reflects Hong Kong’s ambition to lead in financial innovation during the digital era. The goal is clear: balance innovation with risk management, attract high-quality global institutions, and integrate blockchain technology into mainstream finance.
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The LEAP Framework: Building a Future-Proof Ecosystem
At the core of Hong Kong’s strategy is the LEAP framework, a forward-looking blueprint designed to guide sustainable growth and adaptability in the fast-evolving digital asset landscape:
- Legal and Regulatory Streamlining
- Expanding the Suite of Tokenized Products
- Advancing Use Cases and Cross-Sector Collaboration
- Developing Talent and Infrastructure
This framework ensures policies aren’t constrained by today’s technology but are instead built to evolve with future innovations — from decentralized finance (DeFi) to central bank digital currencies (CBDCs).
Regulatory Clarity and Licensing
A major step forward is the planned consultation on licensing regimes for digital asset trading service providers and custody service providers. The Securities and Futures Commission (SFC) will serve as the primary regulator for both, responsible for licensing, registration, and setting industry standards.
Meanwhile, the Hong Kong Monetary Authority (HKMA) will supervise banks engaging in digital asset activities, ensuring a clear division of responsibilities and minimizing regulatory overlap.
This structure enhances investor protection while reducing regulatory arbitrage — a key concern for institutional players. By creating a transparent and predictable environment, Hong Kong aims to attract serious market participants focused on long-term growth rather than short-term speculation.
Tokenization Takes Center Stage
Tokenization — converting real-world assets (RWAs) into blockchain-based digital tokens — is central to Hong Kong’s vision. The government plans to routinize the issuance of tokenized government bonds, setting a global benchmark for public sector adoption.
The Treasury and Financial Bureau (TFB) and HKMA will review legal frameworks to facilitate broader tokenization across sectors, starting with bond markets that have already passed proof-of-concept stages. This includes re-evaluating settlement, registration, and record-keeping processes to support efficient, secure transactions.
Beyond bonds, the policy encourages tokenizing other financial instruments and physical assets like gold, energy, and real estate. By enabling equal treatment of tokenized ETFs under existing stamp duty exemptions, the government removes a critical barrier to market liquidity.
Currently, all ETFs listed on the Hong Kong Stock Exchange are exempt from stamp duty upon transfer. The government will clarify that this exemption extends to tokenized ETFs, incentivizing market players to explore new models — such as tokenized money market funds — on licensed digital asset platforms.
Future reviews may expand tax benefits to other SFC-authorized funds post-tokenization, pending fiscal impact assessments. Additionally, proposed legislation would grant profits tax exemptions for qualifying transactions involving digital assets in private-placement funds and family investment holding vehicles — effective from the 2025/2026 tax year if approved.
Stablecoins: From Innovation to Infrastructure
Hong Kong isn’t just supporting stablecoins — it’s regulating them with purpose. In a move hailed as groundbreaking, the government confirmed that a licensed stablecoin regime will take effect on August 1, 2025 — one of the first globally to provide formal legal recognition.
Unlike jurisdictions where stablecoins float in regulatory gray zones, Hong Kong requires their use to be tied to real economic functions: trade settlements, cross-border payments, and financial inclusion. This prevents speculative misuse while promoting practical utility.
As Financial Secretary Paul Chan emphasized, stablecoins are not just tech experiments — they’re potential pillars of next-generation financial infrastructure. The government welcomes proposals from industry players on how licensed stablecoins can improve public payment efficiency, signaling top-down support.
HashKey Group Chairman Xiao Feng noted this marks a pivotal shift: Hong Kong isn’t merely backing Web3 — it’s embedding it into the financial system itself.
Support Systems: Funding, Talent, and Market Access
To turn vision into reality, Hong Kong is investing in ecosystem development through multiple channels:
- Digital港 (Digital Harbour) will launch a blockchain and digital asset pilot funding program, offering financial support and coordination for high-impact projects.
- The InvestHK dedicated team stands ready to assist digital asset firms setting up or expanding in Hong Kong, connecting them with banks, legal advisors, and professional services.
- Regulatory sandboxes allow innovators to test new products under controlled conditions — accelerating time-to-market without compromising compliance.
These initiatives lower operational costs, boost market liquidity, and strengthen Hong Kong’s appeal as a talent magnet for blockchain developers, fintech entrepreneurs, and compliance experts.
Why Hong Kong Over Singapore?
Recent regulatory actions in Singapore have created an opening. Stricter rules have pushed many unlicensed Web3 firms out, leaving only 33 licensed entities — half of which lack global competitiveness. Many operate as subsidiaries serving only domestic clients, with core teams relocating elsewhere.
As Legend Trading CEO Hao observed, Singapore’s influence on Web3 may wane over the next 2–3 years. Analyst Zheng Di believes Hong Kong is poised to reclaim leadership, especially after Singapore’s sovereign fund Temasek suffered heavy losses from FTX investments.
Hong Kong offers something unique: a blend of global connectivity, strong rule of law, capital mobility, and now — proactive pro-innovation policies. With mainland China’s growing interest in digital yuan and blockchain applications, Hong Kong is ideally positioned as a bridge between Chinese digital economy opportunities and global financial innovation.
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Frequently Asked Questions (FAQ)
Q: What is the main goal of Hong Kong’s Digital Asset Policy 2.0?
A: To establish Hong Kong as a global leader in digital assets by building a trusted, innovative ecosystem that integrates blockchain technology with real-world finance through clear regulation, tax incentives, and infrastructure support.
Q: When will Hong Kong’s stablecoin licensing regime start?
A: The licensed stablecoin framework is set to take effect on August 1, 2025 — making Hong Kong one of the first jurisdictions to formally regulate stablecoins.
Q: Are tokenized ETFs tax-exempt in Hong Kong?
A: Yes, the government has confirmed that stamp duty exemptions applicable to traditional ETFs will extend to tokenized ETFs. Profits tax exemptions for private funds using digital assets may follow if legislation passes.
Q: How does Hong Kong plan to promote tokenization?
A: By routinely issuing tokenized government bonds, reviewing legal frameworks for RWAs (like gold and energy), supporting pilot projects via Digital Harbour, and aligning tax policies with market needs.
Q: Who regulates digital asset exchanges in Hong Kong?
A: The Securities and Futures Commission (SFC) is the primary regulator for licensing and oversight of digital asset trading and custody services.
Q: Is Hong Kong aiming to replace Singapore as Asia’s crypto hub?
A: While not explicitly stated, policy momentum, regulatory clarity, and strategic advantages position Hong Kong as a strong alternative — especially as Singapore tightens its approach.
Final Outlook: A New Financial Frontier
Hong Kong’s updated digital asset strategy completes what some call a “trinity” of institutional readiness:
- Regulatory certainty – Clear licensing for trading and custody.
- Asset interoperability – Equal treatment of tokenized real-world assets.
- Tax competitiveness – Stamp duty and potential profits tax relief.
Together, these elements form a powerful foundation. As Financial Secretary Paul Chan stated, digital assets are more than fintech trends — they are strategic tools for enhancing financial inclusion, efficiency, and Hong Kong’s global standing.
With bold leadership, coordinated execution, and sustained investment, Hong Kong is on track to become Asia’s premier compliant hub for digital innovation within 3–5 years.
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