Hong Kong considers crypto investment for fiscal reserves. New regulations and consultations aim to enhance crypto oversight.
A Hong Kong lawmaker has proposed a significant step in the city’s economic strategy. Councilor Ng Kit-chuang suggested that the government should consider including cryptocurrencies in its fiscal reserves. He proposed that the Exchange Fund should be utilized to make investments in the form of digital assets for long-term investment. This move, if implemented, will be aligned with what is happening across the globe, where financial institutions are now venturing into the digital asset space.
The Hong Kong government has also made it clear where it stands. In the case of the Exchange Fund, crypto assets are not a major investment concern. However, representatives said that crypto investments are not completely excluded. If included, these assets would only represent a tiny portion of the fund’s well-diversified portfolio.
This careful approach comes as global financial firms keep on investing in cryptocurrencies. Hong Kong wants to remain an attractive place for business, but stability and obeying the rules are the key. In his comments, the Acting Secretary for Financial Services and the Treasury, Chan Ho-lin, pointed out that the Exchange Fund’s role is to increase the long-term return and diversify risk on global assets.
Chan also said that although HKMA does not target crypto assets, its external investment managers do incorporate them occasionally. However, these investments continue to be low. This is in line with Hong Kong’s 2022 “Policy Declaration on the Development of Virtual Assets.” The policy highlights that the federal government and other regulatory agencies inquire into the principle of “same business, same risks, same rules.”
Hong Kong Plans Public Consultations for New Crypto Rules
The government, for that reason, has initiated measures to enhance regulations for virtual assets. Changes included to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. These changes make it possible for virtual asset service providers to operate at par with international standards. Additionally, the Treasury Bureau will seek advice from the Legislative Council’s Financial Affairs Committee over regulation of fiat currency stablecoin issuers. Proposes are expected to be brought forward soon concerning drafts.
Additionally, Hong Kong authorities are thinking about the licensing standard for virtual asset custody service providers. This proposal should be expected in the course of the next year. The government is also revising rules on the provision of other forms of OTC crypto trading services. The second public consultation will be conducted the following year.
Finally, the Hong Kong government still permits minimal direct investments in cryptocurrencies. However, it is conservative. This is to ensure that the Exchange Fund is balanced and on equal par with another international funds. On the other hand, it fosters Hong Kong’s financial system and its regulatory environment at the same time.
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