A Comprehensive Overview: Systematic Sorting of Hong Kong's Virtual Asset Regulatory Policy Framework

In recent years, virtual assets have rapidly developed globally, posing challenges to traditional financial systems and regulatory frameworks. The high volatility and high leverage characteristics of virtual assets have raised many new issues for regulatory authorities and trading platforms, such as cross-border capital flow regulation, customer identity verification, and systemic financial risk prevention. These issues indicate that the regulation of virtual assets requires multi-party collaboration to address.

As the world's third-largest financial center, Hong Kong plays an important role in the regulation of virtual assets. Hong Kong needs to seek a balance between promoting the development of the global virtual asset market and maintaining financial stability, and it is also an important window for China to explore emerging financial markets. Therefore, Hong Kong's regulatory path for virtual assets is bound to be complex, as it is a process of constantly reconciling globalization with localization, and innovation with stability.

2017-2021: From Risk Warnings to Institutional Prototype

This stage marks the beginning of virtual asset regulation in Hong Kong, primarily focusing on risk warnings while gradually introducing pilot regulatory elements. The regulatory attitude is transitioning from a prudent wait-and-see approach to an orderly and standardized one. Key policies include:

• In September 2017, the Securities Regulatory Commission issued a statement on initial coin offerings, laying the foundation for the classification of virtual assets.
• In December 2017, the Securities Regulatory Commission required financial institutions to ensure that cryptocurrency-related products comply with existing regulations.
• In November 2018, the Securities Regulatory Commission proposed to include compliant virtual asset trading platforms in a regulatory sandbox.
• In March 2019, the Securities Regulatory Commission defined STO and stipulated the responsibilities of intermediaries.
• In November 2019, the Securities Regulatory Commission proposed a licensing system for virtual asset trading platforms.
• In November 2020, the Financial Services and the Treasury Bureau launched a consultation on the amendments to the anti-money laundering regulations.
• In May 2021, the Treasury confirmed the introduction of the VASP licensing system.

During this period, Hong Kong gradually shifted from risk alerts to specific regulations, beginning to define the responsibilities of market participants. Regulatory authorities recognized that virtual assets would become an important component of the financial market, and their attitude shifted towards positive management. However, the principle of "voluntary participation" still applies, and platforms must actively apply for licenses and self-certify compliance with standards.

It is worth noting that the "regulatory sandbox" mechanism has been introduced for the regulation of virtual asset trading platforms. This mechanism allows emerging financial technologies to be tested in a specific environment without having to fully meet existing regulatory requirements, providing development space for innovative projects.

2022: A Key Turning Point in Policy Transformation

2022 marked a watershed for the regulatory policies on virtual assets in Hong Kong. On October 31, the Financial Services and the Treasury Bureau published the first "Policy Declaration on the Development of Virtual Assets in Hong Kong," clearly stating its commitment to actively promoting the development of the virtual asset ecosystem. The declaration not only emphasizes the implementation of a VASP licensing system but also supports emerging scenarios such as tokenization, green bonds, and NFTs, marking a shift in regulatory thinking from "risk-oriented" to "opportunity-oriented."

There are two main driving forces behind this transition: first, the intensification of international competition, which requires Hong Kong to maintain its status as a financial center; second, the development of virtual assets has generated multiple demands, and Hong Kong happens to play a key connecting role. This is not only a response to the innovative financial market but also an active strategic choice for Hong Kong to maintain its financial center status in a complex international environment.

From 2023 to present: Regulatory policies are rapidly iterating, deepening, and transforming.

Since 2023, the regulation of virtual assets in Hong Kong has entered the "practical implementation" stage. The experimental model is gradually being replaced by a complete and mandatory legal and licensing system, with policies evolving from "declaration" to "enforcement." Key developments include:

• In February 2023, Hong Kong issued its first tokenized green bond.
• In June 2023, the Securities Regulatory Commission implemented the "Guidelines for Virtual Asset Trading Platforms" and initiated the VASP licensing system.
• In the same month, the "Anti-Money Laundering and Terrorist Financing (Amendment) Ordinance" came into effect, requiring virtual asset trading platforms to operate under a license.
• In August 2023, the first licensed exchange open to retail investors was established.
• In November 2023, the Securities Regulatory Commission issued a circular regarding activities related to tokenized securities.
• In December 2023, the Monetary Authority and the Securities and Futures Commission jointly issued a circular on activities related to virtual assets, allowing the sale of virtual asset ETFs.
• In January 2024, the first issuance of tokenized securities applicable under Hong Kong law.
• In March 2024, the Monetary Authority launched the "Ensemble Project" to explore the integration of tokenized assets with wCBDC.
• In July 2024, the Monetary Authority launched a regulatory sandbox program for stablecoins.
• In August and September 2024, multiple RWA projects will be launched.
• In February 2025, the second "Virtual Asset Policy Declaration" was released, promoting over-the-counter trading and custody service systems.
• In February 2025, the first tokenized fund aimed at retail investors was approved.
• In March 2025, the number of licensed exchanges increased to 10, and the Securities Regulatory Commission released the "A-S-P-I-Re" regulatory roadmap.

Analysis of the Hong Kong regulatory system

Hong Kong's regulation of virtual assets adopts a "regulatory overlay" strategy based on the existing legal framework, implementing "patchwork" regulation of digital assets through the issuance of guidelines or circulars. This approach is efficient and highly adaptable, reflecting the Hong Kong government's view of virtual assets as an extension of traditional financial assets.

Hong Kong's regulatory focus is on maintaining three lines of defense: financial compliance, anti-money laundering, and investor protection. As an international financial center, Hong Kong is highly dependent on the financial industry, and its regulatory strategy aims to balance innovation and stability. "Patchwork" regulation reduces coordination costs, builds bridges between financial institutions and emerging technology companies, and facilitates the integration of institutional transformation and industrial development.