The virtual asset market, valued at over US$3 trillion in 2024, presents both opportunities and risks, with challenges including regulatory fragmentation, liquidity issues, and the risk of market manipulation.
The market is marked by institutional dominance and retail speculation, with high concentrations of assets, which can lead to systemic vulnerabilities.
SFC’s Role and Regulatory Approach:
Since 2018, Hong Kong’s Securities and Futures Commission (SFC) has been leading in virtual asset regulation. It has focused on licensing platforms and integrating traditional financial safeguards into the virtual asset ecosystem.
New challenges like fragmented liquidity and regulatory arbitrage are emerging, requiring further regulatory attention.
Strategic Initiatives:
Pillar A (Access): Expand market access by introducing licensing regimes for OTC trading and custodial services, and integrating global liquidity providers.
Pillar S (Safeguards): Harmonize compliance requirements and adopt flexible, outcome-based regulatory frameworks.
Pillar P (Products): Enable risk-appropriate investment tools, particularly for professional investors.
Pillar I (Infrastructure): Strengthen market-wide surveillance and oversight, using advanced data analytics and tools.
Pillar Re (Relationships): Foster investor understanding and engagement through education and transparency.
Vision for Future Growth:
Hong Kong aims to become a global hub for virtual assets by balancing regulatory safeguards with fostering innovation. The roadmap outlines the steps for regulatory certainty, market stability, and global coordination.
Collaboration among regulators, financial institutions, and market participants is essential for successfully advancing Hong Kong’s virtual asset ecosystem.
