Hong Kong Promotes Digital Asset Hub Status to South Korea

Hong Kong’s Financial Secretary, Paul Chan Mo-po, recently visited Seoul, South Korea, to promote the region’s latest developments and opportunities in the financial, trade, business, and innovation sectors. This visit is part of Hong Kong’s broader strategy to position itself as a hub for financial innovation, with a particular focus on digital assets and stablecoin regulation, and South Korea is seen as a key partner in this endeavor.

During his visit, Chan Mo-po highlighted the strong interest shown by South Korean financial stakeholders and regulators in Hong Kong’s progress with digital assets, especially the upcoming stablecoin regulation. He noted that the COVID-19 pandemic and geopolitical tensions have led to fewer diplomatic visits to Hong Kong, creating a gap in understanding the region’s current situation. Despite this, Hong Kong’s financial market and IPO fundraising activities have regained the attention of the Korean financial community, leading to increased dealings with Korean-licensed institutions in the city.

Hong Kong’s financial product innovation has also attracted funds from South Korea to its stock market. A “leveraged inverse product” recently listed in Hong Kong, anchored to a large Korean-listed technology company, was described as the first of its kind. This product restricts the buying and selling of related derivatives by Korean investors to Hong Kong alone, demonstrating the city’s product innovation capabilities. The financial secretary emphasized the importance of promoting collaboration, particularly in financial market connectivity, and highlighted Hong Kong’s advantages, including its commitment to “One Country, Two Systems,” its linked exchange rate system, free capital flows, and common law judicial system.

Hong Kong has expressed a desire to facilitate more use cases for stablecoins and other tokenized financial products. This effort is part of the city’s goal to create a trusted and sustainable digital-asset market that can solve real-world economic problems. In the past three years, eleven cryptocurrency exchanges have been licensed by the Securities and Futures Commission (SFC) to operate in Hong Kong, with more initiatives in the works. The Secretary for Financial Services and the Treasury Bureau, Christopher Hui, stated that finance serves the purpose of easing the smooth operation of the real economy, the value chain, the movement of goods and services, and the transfer of assets and products. He also mentioned that the main goal is to find ways to boost benefits, particularly in less liquid asset trading and higher access thresholds that require appropriate legal provisions and support.

Operating on the principle that similar rules should apply to similar risks, the bureau has put together regulations for four “blocks” of digital assets, including exchanges, stablecoin issuers, dealing service providers, and custodians. Hui also mentioned plans to conduct a systematic review of Hong Kong’s legislation to evaluate its support for smart contracts, as the blockchain feature underpins various financial innovations. This review aims to ensure that the legal framework supports the growth and development of the digital asset market in Hong Kong, making it a value creator and solution provider for real economic issues and challenges in the region and across the world.