What other "big moves" are worth paying attention to in the Hong Kong virtual asset market?

Author: Bitkoala Editor: Daheilong

Yes, Hong Kong's virtual asset market has received good news again.

Bitkoala learned that Hong Kong's virtual asset investment will not be subject to capital gains tax, which is very attractive to global investors. In fact, Hong Kong's virtual asset market has launched many preferential measures, Bitkoala will review one or two for you in this article.

What are the commendable measures in Hong Kong's virtual asset market that are worth paying attention to?

1. Supervision first, compliant operation: Hong Kong's virtual asset market has been continuously developing and improving in recent years to ensure orderly operation and protect the interests of investors. Since June 1, 2023, the Hong Kong Securities and Futures Commission has begun to accept license applications for virtual asset trading platforms, which means that institutions operating virtual asset businesses in Hong Kong must obtain licenses from the Hong Kong Securities and Futures Commission and be regulated by it. In fact, it is this licensing system that allows every virtual asset exchange operating in Hong Kong to operate in compliance.

2. Full collaboration among various regulatory units: Another point that few people have noticed is that the collaboration and cooperation between various regulatory agencies in Hong Kong is very good. The Hong Kong Securities and Futures Commission (SFC) has issued a regulatory framework for virtual asset trading platforms, providing a clear legal and regulatory environment for virtual asset transactions. The framework includes compliance requirements for platform operations to ensure the safety of investors' funds and the fairness of the market. The Hong Kong Monetary Authority (HKMA) has launched a regulatory sandbox mechanism that allows fintech companies to test their virtual asset products and services in a controlled environment, thereby reducing regulatory barriers in the innovation process. As for stablecoins, the Hong Kong Monetary Authority has clearly pointed out that certain types of virtual assets of stablecoins are more likely to have payment functions, or may bring risks different from other virtual assets, such as whether the mechanism used to provide value support is robust, or the impact on real economic activities when the stablecoin payment function is blocked. It is also considering whether supervision is needed.

3. Emphasis on talent training: The Hong Kong government and financial institutions actively promote the training of financial technology talents, establish financial technology-related courses in cooperation with universities, hold various industry forums and training, and provide talent support for the virtual asset market. In addition, Hong Kong has strengthened cooperation with other countries and regions in virtual asset supervision and signed a number of memorandums of understanding (MoUs) to promote the legalization and standardization of cross-border virtual asset transactions. The Hong Kong government and financial institutions strongly support the application of blockchain technology in the financial field. By funding research projects and technical pilots, they promote the application of blockchain technology in transaction settlement, supply chain finance, etc., and improve the efficiency and transparency of the virtual asset market.

VAT-free is favored by investors

At present, although Japan and Australia have vigorously developed the virtual asset market earlier than Hong Kong, both Japan and Australia need to pay capital gains tax. The relevant taxes will be included in the calculation of the comprehensive tax rate. The comprehensive tax rate in Japan and Australia can be as high as 50% and 40% respectively. For investors, investment return is of course the most important consideration, and Hong Kong's low tax system will attract more international investors to Hong Kong.

Lu Zhihong, managing partner of Deloitte China Digital Assets Hong Kong, said that the Hong Kong financial market has been developing for many years and has experienced the Asian financial crisis in 1997 and the financial tsunami in 2008. The supervision of the capital market and financial system has become increasingly perfect. After the virtual asset trading platform licensing system takes effect on June 1, 2023, it will greatly enhance the confidence of global investors in the Hong Kong virtual asset market. With clearer regulatory guidelines, it will bring new opportunities to the brokerage and asset management industries engaged in virtual asset trading, and also provide more protection for retail investors.

In addition, in recent years, the SAR government has introduced various regulatory measures involving anti-money laundering, licensing and anti-hacking, taking the initiative to promote market standardization and explore relevant policy formulation options, which shows Hong Kong's determination to develop the virtual asset market.

The industry generally believes that Hong Kong has achieved remarkable results in the virtual asset market in recent years. In addition to having clearer regulatory guidelines to attract a large number of talents and investors, Hong Kong is also very active in developing tokenized securities and stablecoins. For example, last year, the HKMA successfully launched 800 million yuan of tokenized green bonds and established a stablecoin issuer sandbox, which received enthusiastic support from the industry.

In addition, with the cooperation of the Hong Kong Stock Exchange and the Securities and Futures Commission, new products are constantly being launched in the market. In April this year, the first batch of virtual asset spot ETFs were officially listed. Due to the positive attitude of the SAR government, many institutions also hope to develop in Hong Kong, and at the same time, talents and investors have more confidence in Hong Kong's prospects. This is also the biggest achievement of Hong Kong in developing the virtual asset market in recent years.

Just like the Fintech Week held last year, Coinbase co-founder and CEO Brian Armstrong also participated via video and said that Hong Kong has done a good job in regulating the virtual asset field. The Hong Kong Securities and Futures Commission and the Hong Kong Monetary Authority provide clear supervision, allowing banks to strengthen cooperation with the virtual asset field, and even pointed out that the United States needs to make improvements.

Bitkoala learned that OSL Group Financial Director Hu Zhenbang has made it clear that the Hong Kong SAR government’s declaration on virtual assets has indeed strengthened the confidence of the industry. There was a period of time when some virtual asset-related companies moved from Hong Kong to Singapore for development, but in the past year, a large number of these companies have returned to Hong Kong, which shows that there is greater confidence in the future development of Hong Kong’s virtual asset market.

Summary

Today, the industry generally believes that Hong Kong’s advantages in developing the virtual asset market are becoming more and more obvious, especially for licensed (and recognized as licensed) trading platforms. Local regulators have made strict requirements in many aspects such as compliance, security, transaction fees, trading varieties, liquidity, user experience, customer service, educational resources and information.

There is no doubt that Hong Kong has built a safe, transparent and competitive virtual asset market, which has effectively attracted global investors and enterprises. Frankly speaking, both virtual asset trading service providers and investors should make good use of Hong Kong's advantages as an international financial center, grasp the trend of technological financial services, make full use of Hong Kong's established sound regulatory system, and explore and develop virtual asset innovation business on this soil that is compatible with regulation, development, tradition and innovation.