Leung stated that their objective is to balance catering to investor demand with implementing robust safeguards to mitigate risk.
The cryptocurrency market has endured wild swings and regulatory scrutiny, but Bitcoin (BTC) continues to demonstrate its tenacity as an alternative asset class, according to Hong Kong’s Securities and Futures Commission (SFC) chief executive Julia Leung.
Leung, speaking at the Greenwich Economic Forum Hong Kong on June 5th, 2024, acknowledged the ongoing debate surrounding the intrinsic value of virtual assets like Bitcoin and Ethereum (ETH).
Leung admitted that many central bankers and economists would argue that these assets lack inherent worth. While that discussion persists, the undeniable fact is that Bitcoin has weathered numerous boom-and-bust cycles over the past 15 years, showing its resilience as an alternative asset.
“I do not disagree with this view. While the intrinsic value debate will continue, it is a fact that, 15 years on, Bitcoin has survived multiple cycles of boom and bust, clearly showing its staying power as an alternative asset,” said Leung.
Leung’s comments came as the SFC’s licensing regime took effect, requiring all crypto trading platforms to be licensed to serve retail investors in Hong Kong. This framework has faced criticism. Lawmaker Duncan Chiu argued that the “overly stringent” rules deter major global exchanges, hurting investor confidence.
Regulation of Fiat-Backed Stablecoins in Hong Kong
Leung emphasized that the SFC’s support for Hong Kong’s Web3 ecosystem “should not be taken as an endorsement of the VA asset class”. She highlighted the inherent volatility of the market, stating:
“As things currently stand, VAs are highly speculative in nature with extreme price volatility.”
Leung stated that their objective is to balance catering to investor demand with implementing robust safeguards to mitigate risk. The SFC is actively working on establishing regulations for stablecoins, a type of cryptocurrency pegged to a fiat currency.
“Preparations for a new regime to regulate fiat-referenced stablecoins are underway,” Leung announced. “The Hong Kong Monetary Authority has completed a consultation on the proposed regime, including requiring stablecoin issuers to ensure full backing by high-quality and highly liquid reserve assets.”
CBDC Tokenization Initiative
The SFC is also collaborating with the HKMA on Project Ensemble, a tokenization initiative launched in March 2024 to explore the potential of a central bank digital currency (CBDC) for Hong Kong.
Leung explained that this novel project will focus on wholesale CBDCs and initially delve into tokenized deposits. They will establish a regulatory sandbox to test various tokenization use cases, including the trading and settlement of tokenized products like green bonds and carbon credits.
Leung recognizes Bitcoin’s staying power, highlighting cryptocurrencies’ potential in finance. However, the main focus is on protecting investors and encouraging responsible innovation. As Hong Kong navigates this space, the SFC’s regulations will shape the future of digital assets.
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