Joseph Chan: Hong Kong is going all out to promote the application of AI in the financial sector

Joseph Chan, Under Secretary for Financial Services and the Treasury of Hong Kong, speaking at the 47th Anniversary Financial Innovation Forum of the Hong Kong Securities Association on October 30, noted that gathering under the theme "Embracing Financial Transformation: Technology Reshaping Markets" demonstrates the innovative and adaptable spirit of Hong Kong's financial industry. Facing the wave of frontier technologies such as artificial intelligence (AI) and blockchain, we must not only proactively embrace this transformation but also harness the power of technology to jointly write a new chapter for Hong Kong's financial market. The Chief Executive of Hong Kong clearly stated in the "Five-Year Plan" announced last month that finance is Hong Kong's foundation and greatest advantage. In terms of fintech development, Hong Kong is going all out to promote the comprehensive application of AI across various financial sectors. The Securities and Futures Commission (SFC) issued a circular to licensed institutions in June this year providing guidance on emerging cyber threats arising from frontier AI models, and reminding licensed institutions to pay attention to the cybersecurity risks that may be brought about or exacerbated by the use of AI models in their business; the SFC is also collaborating with tech startups on regulatory technology research and development to deepen industry understanding and enhance training. In the banking sector, the Hong Kong Monetary Authority (HKMA) announced the "ART" framework this month to support the responsible application of AI in banking, aiming to build an accountable, resilient and trustworthy AI-enabled banking ecosystem. In the insurance sector, the Insurance Authority launched the "AI Promotion Programme" last year, which has attracted the participation of ten major insurance companies, accelerating the development of the insurance industry's AI ecosystem by providing shared resources, supporting compliance testing and facilitating supply-demand matching. Meanwhile, the HKMA has joined forces with the SFC, the Insurance Authority, the Mandatory Provident Fund Schemes Authority and Cyberport to launch the "Generative AI Sandbox++", expanding its coverage to multiple sectors including banking, securities and capital markets, asset and wealth management, insurance, Trillions of MPF (Mandatory Provident Fund) and stored value payment facilities. 36 use cases from 30 financial institutions and 27 technology partners have been invited to join the programme. While actively embracing AI innovation, Hong Kong is also committed to building a sound regulatory system to ensure that AI, while empowering financial development, effectively guards against systemic risks. At the same time, the Hong Kong government is actively building a safe, transparent and competitive Web3 and digital asset ecosystem. The Stablecoins Ordinance has been formally implemented, and the HKMA has this year granted licences to two institutions with banking backgrounds, which have also launched regulated stablecoins in Hong Kong, injecting new momentum into the market. Under the direction of the "Policy Statement on the Development of Digital Assets in Hong Kong 2.0", the Hong Kong government will establish a licensing regime for virtual asset trading, custody, advisory and management services, and will submit an amendment bill to the Legislative Council within 2026 to clarify the compliance pathway for the market. He emphasized that Hong Kong adheres to the international principles of "same business, same risk, same rules", and a transparent, robust and highly predictable regulatory framework is precisely the confidence that enables innovators to establish themselves in Hong Kong. Technology is profoundly reshaping the landscape of global financial markets, and Hong Kong is at the forefront of this transformation. The SAR government will continue to work hand in hand with the securities industry, driving development through innovation and shoring up the safety bottom line through regulation.