Chen Haolian: The plan for the issuance of virtual asset custody service licenses is scheduled to undergo public consultation this year.

On January 21st, Hong Kong's Under Secretary for Financial Services and the Treasury, Joseph Chan Ho-lim, stated that Hong Kong has taken various measures to promote the development and regulation of virtual asset businesses. By the end of 2024, seven virtual asset trading platforms have obtained legal licenses and are operating in accordance with relevant regulations. However, with the rapid growth of the virtual asset market, the regulation of stablecoins and the virtual asset ecosystem faces new challenges. To ensure that customer virtual assets held by service providers are adequately protected, a licensing system for virtual asset custody service providers is being developed, with plans for public consultation to take place this year. Chan Ho-lim noted that to expedite the processing of license applications from virtual asset trading platform operators who have been conducting business in Hong Kong, the Securities and Futures Commission (SFC) has implemented a fast-track licensing procedure. Currently, the SFC is processing 11 applications under the Anti-Money Laundering Ordinance, with seven being considered for licensing and undergoing on-site inspections to ensure compliance with regulatory requirements. However, as the virtual asset market continues to grow rapidly, new challenges and risks are emerging. In particular, given the significant role stablecoins play in the Web3 and virtual asset ecosystem, and the increasing connectivity between the traditional financial system and the virtual asset market, the Hong Kong government proposed the Stablecoin Bill to the Legislative Council on December 18, 2024. The regulatory framework aims to address potential risks posed by fiat-backed stablecoins to currency and financial stability, and provide protection for users of fiat-backed stablecoins. A committee held its first meeting earlier today to discuss the proposed legislation. Beyond the regulation of stablecoins, the virtual asset ecosystem also includes over-the-counter (OTC) exchanges, which operate through physical stores or online platforms and are easily accessible to the general public. OTC trading services for virtual assets are also under consideration, with the first round of consultations held in 2024. Feedback received will be used to adjust the framework for a second round of consultations expected to take place this year. Additionally, to ensure the adequate protection of customer virtual assets held by service providers and manage related risks effectively, Hong Kong is also working on a licensing system for virtual asset custody service providers, with plans for public consultation to be conducted this year. Chan Ho-lim emphasized that regulatory oversight of virtual assets is an ongoing effort, with adjustments and enhancements to the regulatory framework being made based on market developments and international regulatory discussions. The goal is to create a favorable business environment and promote the sustainable and responsible development of Hong Kong's third-generation internet and virtual asset ecosystem through appropriately regulated service providers.