Hong Kong has updated its digital asset strategy, introducing the LEAP framework to foster market growth through stablecoin licensing and real-world asset tokenization. The region's latest policy blueprint places stablecoin regulation and asset tokenization at the core of its strategy to become a global hub for cryptocurrency and fintech innovation.
Introducing the LEAP Framework
A newly released policy statement outlines the LEAP framework, which focuses on four key areas: Legal clarity, Ecosystem expansion, Actual applications, and talent development. This framework builds upon the government’s initial policy statement from October 2022.
The Hong Kong government will implement a licensing regime for stablecoin issuers starting August 1. Officials state that this move will "promote the development of practical application scenarios."
The Securities and Futures Commission (SFC) will oversee the licensing of digital asset trading and custody service providers. Meanwhile, the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority will lead legal reviews to support the tokenization of real-world assets (RWAs).
Regulating Tokenized Bonds and ETFs
The government plans to regulate the issuance of tokenized government bonds and promote tokenized exchange-traded funds (ETFs) by clarifying their stamp duty treatment.
The policy statement notes: "Based on this, the government welcomes the introduction of secondary market trading for these tokenized ETFs through licensed digital asset trading platforms or other channels."
Beyond bonds and funds, the initiative aims to incentivize tokenization across various sectors, including precious metals and renewable energy assets. This demonstrates "the versatility of this technology across multiple fields such as precious metals (like gold) and solar panels."
Supporting Innovation and Talent Development
New measures to foster innovation include the Cyberport Funding Scheme, designed to support outstanding blockchain and digital asset projects.
Financial Secretary Paul Chan emphasized in a statement that the new framework "showcases the practical applications of tokenization" and aims to "build a more prosperous digital asset ecosystem, integrating the real economy with social life."
The government has announced it will soon launch a public consultation on the new licensing regime.
Focus on Crypto Derivatives and Market Growth
Earlier this month, Hong Kong financial authorities indicated plans to introduce digital asset derivative trading for professional investors. This follows recent approvals for spot crypto ETFs, futures products, and staking services—including HashKey's staking service approval in April.
In May, the Hong Kong Legislative Council passed the Stablecoin Bill, paving the way for a regulatory framework that could position the region as a global leader in digital asset and Web3 development. This progressive approach provides a clear path for businesses and investors looking to engage with emerging technologies. 👉 Explore more regulatory strategies
Frequently Asked Questions
What is the LEAP framework in Hong Kong?
The LEAP framework is Hong Kong's strategic approach to digital asset development, focusing on Legal clarity, Ecosystem expansion, Actual applications, and talent development. It aims to create a supportive environment for blockchain innovation and financial technology growth.
How will Hong Kong regulate stablecoins?
Starting August 1, stablecoin issuers must obtain a license under the new regime. The Securities and Futures Commission will oversee compliance, ensuring that issuers meet specific operational and financial standards to protect investors and maintain market stability.
What are tokenized bonds?
Tokenized bonds are digital representations of traditional bonds issued on a blockchain. They offer benefits such as faster settlement, increased transparency, and fractional ownership, making them more accessible to a broader range of investors.
Can investors trade tokenized ETFs in Hong Kong?
Yes, the government encourages secondary market trading of tokenized ETFs through licensed platforms. Clarifications on stamp duty treatment aim to make these products more attractive to both issuers and investors.
What sectors beyond finance are targeted for tokenization?
Hong Kong's policy includes tokenization initiatives for precious metals, renewable energy assets, and other real-world assets. This broad approach highlights the technology's potential to transform various industries by improving efficiency and liquidity.
How does Hong Kong's approach compare to other regions?
Hong Kong is positioning itself as a forward-thinking regulator by embracing digital assets and creating clear legal frameworks. This contrasts with some regions that have taken a more cautious or restrictive approach, potentially making Hong Kong a more attractive hub for innovation.