Introduction

As Asia’s leading international financial center, Hong Kong has transitioned from cautious skepticism to open support for cryptocurrency regulation. This article charts Hong Kong’s journey from having no crypto oversight to implementing comprehensive regulations, spanning 2014 to 2024. By analyzing these developments, readers can better understand Hong Kong’s legal and policy framework for cryptocurrencies and its unique position in the global market.

Overview of Hong Kong & Mainland China’s Cryptocurrency Regulatory Evolution (Past 10 Years)

Background and Key Policy Measures of Hong Kong’s Cryptocurrency Market

In recent years, the HKMA and SFC have expanded their regulatory scope over cryptocurrency-related activities to protect investors better and establish a coordinated regulatory framework for the ecosystem.

Stages of Hong Kong’s Cryptocurrency Regulatory Development:

Hong Kong, as a bridge between China and the world, has shown a significant shift in its attitude and regulation toward cryptocurrencies compared to mainland China’s conservative “blockchain, not crypto” stance. Over the decade from 2014 to 2024, the regulatory evolution can be divided into four periods: the early development stage, policy liberalization stage, regulatory framework exploration and establishment stage, and full opening stage. The following outlines key milestones in this process:

2014–2015: Early Development Stage

• Following the Mt. Gox incident in 2014, Hong Kong became an important cryptocurrency trading hub, attracting platforms like Bitfinex.
• In 2015, the Bitstamp hacking incident resulted in the loss of 19,000 bitcoins, highlighting security concerns in the early market.

2016–2017: Policy Liberalization Stage

• In 2016, the Financial Secretary supported blockchain technology in financial services.
• In 2017, cryptocurrencies were classified as “virtual commodities” rather than securities, reflecting a relatively lenient regulatory stance.
• The same year saw a booming ICO market, raising over $5 billion, with several exchanges establishing operations in Hong Kong.

2018–2021: Regulatory Framework Establishment Stage

• The introduction of a regulatory sandbox allows virtual asset trading platforms (VATPs) to operate under specific conditions.
• In 2019, the SFC issued guidelines for virtual asset trading platforms, requiring compliance with anti-money laundering (AML) and identity verification regulations.
• In 2021, the SFC began issuing licenses to virtual asset trading platforms, marking a mature regulatory milestone.

2022–Present: Full Opening Stage

• In 2022, a policy statement declared Hong Kong as a global hub for Web3 development.
• In 2023, the VASP licensing regime was enhanced to cover services across the industry chain, including trading and custody.
• The “InnoTech 2030” initiative was launched to support blockchain infrastructure development and attract international talent and capital.

Before 2017, the focus was primarily on bitcoin trading and ICOs. Regulatory measures were largely aimed at warning investors about risks without a comprehensive framework.

However, after 2018, as the cryptocurrency market expanded rapidly and cases of illegal fundraising and money laundering increased, Hong Kong’s regulators began exploring a more refined framework. The SFC introduced a sandbox initiative, allowing VATPs to operate under specific conditions, and providing a testing environment to facilitate compliant virtual asset development. Subsequently, in 2021, the issuance of licenses to VATPs signaled the maturation of Hong Kong’s regulatory landscape.

Hong Kong’s Cryptocurrency Regulatory Authorities

Hong Kong adopts a multi-agency collaborative model in cryptocurrency regulation involving the following institutions and their responsibilities:

As shown in the diagram above, four-starred institutions—SFC, HKMA, IRD, and FSTB—play a primary role in cryptocurrency regulation in Hong Kong. They are responsible for formulating and enforcing key policies and regulatory scopes for the cryptocurrency market.

• Securities and Futures Commission (SFC): Oversees cryptocurrency exchanges, crypto funds, and ETFs.
• Hong Kong Monetary Authority (HKMA): Regulates stablecoins and the digital Hong Kong dollar (CBDC).
• Inland Revenue Department (IRD): Oversees cryptocurrency transactions and holders.
• Financial Services and the Treasury Bureau (FSTB): Regulates market participants such as investors and exchanges in the crypto asset market.

These institutions operate independently of each other, with a clear division of responsibilities. The SFC and HKMA are the core regulatory bodies directly involved with the cryptocurrency industry, targeting exchanges, funds, and stablecoins. Meanwhile, the IRD and FSTB are critical in policy support and developing a favorable tax environment. Together, these four institutions form the main regulatory framework for the cryptocurrency industry.

Definition of Cryptocurrency in Hong Kong

After understanding Hong Kong’s cryptocurrency regulatory framework, let us first examine how cryptocurrency is defined in Hong Kong before delving into specific policy measures.

Under Hong Kong law, cryptocurrencies are not considered legal tender regulated by the HKMA, meaning no digital asset is currently supported by the Hong Kong government.

Thus, Hong Kong defines cryptocurrencies primarily as virtual assets and categorizes them based on their usage and characteristics, excluding central bank digital currencies (CBDCs). For more details, refer to the SFC website. Below is a summary of Hong Kong’s broad definition and legal interpretation of cryptocurrencies:

1. General Definition: Virtual Asset Scope
   According to the SFC and HKMA, a Virtual Asset (VA) represents a digital form of value, which can include:

• Digital tokens (utility tokens, stablecoins, security tokens, or asset-backed tokens).
• Other forms of virtual commodities, crypto-assets, or similar assets.
• Exclusions: Central bank digital currencies (CBDCs) or government-supported fiat currencies are excluded.

1. Definition under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO)
   Under AMLO, virtual assets are defined as:

• Representations of value stored or accounted for economically.
• Used as a medium of exchange or investment tool, including for payments, debt settlement, governance rights, or voting rights.
• Transferable, storable, or tradable electronically, such as Bitcoin and stablecoins.

Explicit exclusions: Central bank-issued currencies, securities or futures contracts regulated under the Securities and Futures Ordinance (SFO), stored value facilities, and limited-use digital tokens (e.g., loyalty points and in-game assets).

Regulation of Cryptocurrency Businesses and Market Participants in Hong Kong

The first and most important step is the Mandatory VASP Licensing Regime. The SFC issues ten types of financial licenses:

• Type 1 License: For securities trading, including services like stock, stock options, bond trading, and brokerage. It also covers mutual fund distribution, unit trust underwriting, and securities placement.
• Small Type 1 License: Customers cannot open accounts, deposit funds, or place trades directly but can legally earn commissions.
• Large Type 1 License: Similar to mainland securities firms, allowing for securities trading and margin financing.
• Type 2 License: For futures contract trading, providing index or commodity futures trading and brokerage services.
• Type 3 License: For leveraged foreign exchange trading services.
• Type 4 License: For securities investment advice, including research reports.
• Type 5 License: This is for investment advice on future contracts, including research analysis.
• Type 6 License: For corporate finance advisory, such as sponsoring IPOs and advising on listing compliance.
• Type 7 License: For automated trading services, providing electronic trading platforms for order matching.
• Since November 6, 2019, VATPs operating in Hong Kong can apply for Type 1 and Type 7 licenses from the SFC. However, as detailed in the position paper below, not all exchanges must apply.
• Type 8 License: For margin financing services, such as stock pledge financing.
• Type 9 License: For asset management, including discretionary fund management and investment in securities or futures contracts.
• Small Type 9 License (Private Funds): Prohibits holding client assets and requires separate accounts for each client. Suitable for private equity funds.
• Large Type 9 License (Public Funds): Allows holding client assets, pooling them into unified accounts for broader investment projects.
• Type 10 License: For credit ratings, such as rating companies, bonds, and sovereign credit.

Among these, Type 1 and Type 7 licenses are essential for exchanges to comply with regulations. Additionally, Type 9 licenses are necessary for private or public fund operations to manage user funds legally.

Voluntary Licensing Regime: The “Position Paper”

In 2019, the SFC introduced a regulatory framework for virtual asset trading platforms, detailed in the “Position Paper on the Regulation of Virtual Asset Trading Platforms” (hereinafter referred to as the “Position Paper”).

The Position Paper states that the SFC has no authority to license or regulate platforms that only trade non-security virtual assets or tokens.

This is because such virtual assets do not fall under the “securities” or “futures contracts” defined in the Securities and Futures Ordinance (SFO), and the related platforms’ operations do not constitute “regulated activities” under the ordinance. Therefore, under the “voluntary licensing regime,” platforms solely engaged in non-security token transactions are not required to obtain a license.

The Position Paper extends the SFC’s 2017 regulatory sandbox stance introduced in its circular on the regulatory sandbox for financial technology innovation, demonstrating its specific practices in the field of crypto finance.

According to the Position Paper, centralized virtual asset trading platforms intending to provide trading services for at least one security token must apply to the SFC for Type 1 (dealing in securities) and Type 7 (automated trading services) regulated activity licenses. This regulatory framework includes strict standards for asset custody, cybersecurity, anti-money laundering (AML), market monitoring, accounting and auditing, product due diligence, and risk management.

The SFC emphasizes that its regulatory scope is limited to centralized virtual asset trading platforms that provide trading, settlement, and clearing services and control investors’ assets.

The SFC will not accept their license applications for platforms offering only peer-to-peer market trading services where investors retain control over their assets (whether fiat or virtual). In other words, decentralized virtual asset trading platforms are not subject to SFC regulation.

Additionally, platforms that only facilitate virtual asset transactions for clients (including transmitting transaction instructions) but do not provide automated trading services will also not be eligible for SFC licensing.

Key Measures of Hong Kong’s Cryptocurrency Regulation in 2024

Hong Kong’s regulatory authorities apply existing laws and create new regulations to govern the cryptocurrency industry. Adopting a technology-neutral approach, regulation focuses on the economic functions of crypto activities rather than the underlying technology.

In the 2021 “Fintech 2025” strategy, the HKMA announced initiatives like “Commercial Data Interchange (CDI)” to enhance data infrastructure and support digital financial products.

In late 2024, Legislative Council member Ng Kit-chung proposed a “Digital Pass” to allow mainland investors to trade Hong Kong-recognized digital assets, enriching cross-border connectivity and aligning with CDI goals.

Key policies for 2024 include:

1. Licensing Regime: Since June 2023, Hong Kong has implemented a Virtual Asset Service Provider (VASP) licensing regime. All cryptocurrency trading companies must obtain a license from the Securities and Futures Commission (SFC).
2. Compliance Requirements: Licensed companies must adhere to stringent compliance standards, including anti-money laundering (AML) and counter-terrorist financing (CTF) measures, while strengthening customer identity verification (KYC).
3. Investor Protection: New regulations emphasize investor protection. Virtual asset platforms must ensure transparent information disclosure and establish risk management measures to prevent losses.
4. OTC Market Regulation: New rules for over-the-counter (OTC) markets require reporting and compliance checks to enhance industry transparency.
5. Mining Regulation: Policies are being formulated to guide cryptocurrency mining activities’ legalization and environmental compliance.
6. Education and Training: Initiatives aim to enhance industry professionals’ and investors’ understanding of virtual assets and associated risks.

These new policies aim to establish Hong Kong as a secure and orderly digital asset ecosystem while promoting financial innovation and growth. To better understand Hong Kong’s cryptocurrency regulations, these measures are categorized into six areas: market access, tax policies, stablecoin regulation, technology and innovation support, investor protection, and special policies.

1.Market Access

• VASP Licensing Regime
  Since June 1, 2023, Hong Kong has implemented a Virtual Asset Service Providers (VASP) licensing regime. Under this regime, all virtual asset exchanges operating in Hong Kong must apply for and obtain a license from the Securities and Futures Commission (SFC). Key requirements include:

  • Compliance with Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations.
  • Ensuring segregated management of client assets.
  • Establishing robust internal controls and auditing mechanisms.
  • Maintaining a minimum paid-up capital of HKD 5 million.
  • Strict management of private keys, ensuring storage within Hong Kong.

• To date, only OSL and HashKey have received licenses, while 22 companies, including OKX and Bybit, are actively applying.

• Virtual Asset Funds and ETFs
  Hong Kong permits establishing and operating virtual asset funds, but they are limited to professional investors. In 2023, Hong Kong also approved spot and futures ETFs for virtual assets, with regulatory requirements including:

  • Manager Qualifications: Managers must hold an upgraded Type 9 license and have relevant experience.
  • Underlying Assets: Assets must be tradable on licensed exchanges in Hong Kong.
  • Investment Strategy: Leveraged trading at the fund level is prohibited.
  • Custody Arrangements: ETF-held assets must be managed by custodians approved by the HKMA.

2.Tax Policies
Hong Kong’s tax policies for virtual assets are relatively clear:

• Capital Gains Tax:
  No capital gains tax means profits from holding virtual assets are generally not taxed. However, frequent trading activities classified as business income may be subject to profits tax.

• Profits Tax:
  Business-related activities, such as mining or operating exchanges, are subject to a corporate tax rate of 16.5%.

• Salaries Tax:
  Virtual assets provided as employee compensation must be reported at market value and taxed accordingly.

• Cross-Border Taxation:
  Taxation is based on the source of income. Income deemed to originate outside Hong Kong is exempt from profits tax, providing advantages for cross-border crypto enterprises.

• Asset Valuation and Record-Keeping:
  The Inland Revenue Department recommends maintaining detailed records of virtual assets, including transaction times, values, and corresponding fiat currency exchange rates, for tax calculation purposes.

Hong Kong’s tax policies offer flexibility and a low-tax environment, attracting numerous blockchain and cryptocurrency companies to set up operations in the city.

3.Stablecoin Regulation
Stablecoins are considered a critical component of the cryptocurrency market. Hong Kong has introduced a specialized regulatory framework for fiat-backed stablecoins (FRS):

• Issuers must obtain a license from the HKMA.
• Reserve assets must meet stability requirements and provide redemption at face value.
• Only licensed FRS can be sold to retail investors.
• Stablecoins pegged to the Hong Kong dollar are subject to additional scrutiny and oversight.

4.Technology and Innovation Support

• Sandbox Program
  The HKMA and SFC have established regulatory sandboxes to allow cryptocurrency companies and startups to test products and services in controlled environments, fostering innovation while managing risks.

• Central Bank Digital Currency (CBDC) \
  Hong Kong continues to explore retail-level CBDCs, including testing for the digital Hong Kong dollar, to advance digital finance and virtual asset applications.

5.Investor Protection

• Compliance Safeguards: Platforms must ensure the safety of client assets through segregation and insurance measures.
• AML/CTF Requirements: Cryptocurrency businesses must adhere to AML and CTF laws, conduct customer due diligence (KYC), and submit regular audit reports.
• Risk Disclosure: Platforms and fund managers must provide comprehensive risk disclosures to ensure investors are aware of associated risks.

6.Special Policies

• Virtual Asset Funds Virtual asset funds are restricted to professional investors. Fund managers must hold SFC licenses and conduct risk assessments and disclosures for investors.

Hong Kong’s Cryptocurrency Regulation and Global Market Macro Analysis

Impact of Hong Kong’s Cryptocurrency Policies on the Market

Through the VASP licensing regime, the Hong Kong government has regulated the cryptocurrency market, improving market transparency and security while attracting international platforms such as OKX and Bybit. Locally, these policies strengthen investor protection by requiring exchanges to comply with stringent AML and CTF regulations, boosting confidence among Hong Kong residents in cryptocurrency investments. From a global perspective, Hong Kong’s relatively lenient regulatory approach contrasts sharply with mainland China’s strict restrictions, positioning Hong Kong as a key Asian cryptocurrency hub.

Comparison of Hong Kong’s Policies with Other Markets

1.Hong Kong’s Cryptocurrency Policies

• VASP Licensing Regime: All virtual asset exchanges must apply for an SFC license to ensure compliant operations, including AML, customer asset protection, and other requirements.
• Stablecoin Regulation: Focused on fiat-backed stablecoins, requiring issuers to obtain HKMA licenses.
• Sandbox Program: Allows startups to test innovative technologies in controlled environments, fostering technical innovation and market application.
• Tax Environment: Offers the advantage of no capital gains tax, with relatively lenient tax treatment for trading activities.

2.Policies in Other Markets

• United States:
  Focuses on strict regulation. The SEC classifies some cryptocurrencies as securities, requiring compliance with securities laws. The U.S. emphasizes asset reserves and transparency for stablecoins, pushing for legislative frameworks such as the Stablecoin Transparency Act. However, regulatory uncertainty has driven some companies overseas.

• European Union:
  The EU introduced the Markets in Crypto-Assets Regulation (MiCA), providing a unified legal framework for all virtual assets, including stablecoins, token issuance, and exchanges. The EU prioritizes investor protection and innovation while addressing environmental concerns like PoW energy consumption. \

• Singapore:
  The Monetary Authority of Singapore (MAS) enforces the Payment Services Act, offering licenses to cryptocurrency exchanges for payment services while requiring strict AML and CTF compliance. Singapore’s policies on stablecoins and DeFi are relatively lenient, making it a leading crypto market in the Asia-Pacific region alongside Hong Kong.

• Mainland China:
  China has imposed a complete ban on cryptocurrency trading but actively promotes developing and applying the central bank digital currency (digital yuan), positioning it as a key tool for the digital economy.

• Japan:
  The Financial Services Agency (FSA) mandates licenses for virtual asset exchanges and provides detailed classifications of cryptocurrencies, such as payment tokens and utility tokens. For stablecoins, issuers must be banks or authorized trust companies.

3.Summary of Policy Comparisons

The chart compares six major markets (Hong Kong, the U.S., the EU, Singapore, China, and Japan) based on four aspects:

• Regulatory Framework: Hong Kong emphasizes compliance and security with its VASP licensing system. The U.S. enforces securities laws, the EU adopts the unified MiCA framework, Singapore supports innovation with safety, China bans trading entirely, and Japan applies a clear licensing system for exchanges.
• Stablecoin Policies: Policies vary significantly, from Hong Kong’s focus on fiat-backed stablecoins to strict regulations in the U.S., lenient policies in Singapore, no market in China, and restrictions in Japan requiring issuers to be banks or trust companies.
• Technical Support: Hong Kong and Singapore actively promote innovation through sandboxes and technology adoption. China focuses on CBDC development, while other regions have their priorities.
• Tax Environment: Both Hong Kong and Singapore offer no capital gains tax. The U.S. tax environment varies by state, some EU countries also lack capital gains tax, while Japan taxes based on trading income.

Macro Analysis

Impact on Market Development

• Hong Kong’s regulatory policies provide international crypto firms with a stable operating environment, attracting capital inflow and enhancing market internationalization.
• Strict regulations in the U.S. and EU protect investors but may stifle innovation and drive companies to relocate.
• Singapore competes with Hong Kong, with both regions supporting technological innovation and attracting blockchain firms.

Impact on Global Competitive Landscape

• Hong Kong’s role in Asia extends beyond being a financial center to becoming a testing ground for cryptocurrency regulation, potentially bridging mainland China and global markets.
• The EU’s MiCA framework sets a benchmark for global markets and could become a model for other regions.

Opportunities and Risks in Hong Kong’s Regulated Cryptocurrency Market

With the gradual implementation of Hong Kong’s cryptocurrency regulatory policies, the market displays dual characteristics. On the one hand, the strict regulatory framework brings compliance and transparency to the market, attracting the attention of global institutional investors and project developers while promoting the development of stablecoins and the virtual asset trading market. On the other hand, the high compliance costs and potential policy changes could hinder the entry of startups and weaken market innovation.

Under Hong Kong’s regulatory framework, the market offers significant opportunities and risks, analyzed as follows:

Opportunities: Attracting Investors, Promoting Innovation, Connecting with Mainland Markets

1.Attracting Global Crypto Enterprises

• Stable Regulatory Environment: Hong Kong provides a stable and transparent legal environment for cryptocurrency exchanges and related businesses, attracting international enterprises to apply for VASP licenses (e.g., OKX, Bybit).
• Regional Financial Hub Status: As a financial center in Asia, Hong Kong connects capital flows and investor demands between mainland China and international markets, serving as a critical node for global businesses.

2.Fostering Innovation and Technological Development

• Sandbox Support: Hong Kong’s fintech sandbox allows innovative firms to test products, facilitating advancements in blockchain, DeFi, and NFT technologies.
• Digital Hong Kong Dollar (CBDC): The HKMA is advancing the development of the digital Hong Kong dollar, improving application scenarios and cross-border payment efficiency.

3.Attracting Institutional Investors

• ETFs and Virtual Asset Funds: The introduction of spot and futures ETFs attracts institutional capital, providing legitimate and compliant investment channels.
• Regulatory Confidence: Stable regulatory policies increase institutional investors’ trust in cryptocurrency.

4.Connecting Mainland and Global Markets

• Under the “One Country, Two Systems” framework, Hong Kong can link mainland capital to international markets, acting as a bridge for Chinese investors to access the global cryptocurrency market within policy constraints.

Risks: Limiting Market Dynamism, Affecting Cross-Border Operations, Concentrating Risk

1.High Regulatory Barriers Restrict Market Dynamism

• Increased Compliance Costs: The VASP licensing requirements (e.g., HKD 5 million minimum paid-up capital, stringent internal controls) may force small and medium-sized enterprises out of the market.
• Pressure on Entrepreneurs: Excessively stringent regulations may hinder startup growth, impacting market innovation.

2.Intensified International Competition

• Regional Competition: Markets like Singapore and the UAE offer more relaxed regulations and tax incentives, potentially attracting businesses to other regions.
• Lagging in Technology: In the face of rapidly evolving Web3 technologies, Hong Kong’s regulatory pace might fall behind that of other countries or regions.

3.Regulatory Uncertainty and Policy Risks

• Policy Instability: Regulatory policies may change anytime, increasing uncertainty for businesses and investors.
• Cross-Border Conflicts: Regulatory discrepancies between Hong Kong and other countries may hinder cross-border operations.

4.Market Concentration Risk

• Monopoly Concerns: A few licensed firms, such as OSL and HashKey, may dominate the market, stifling competition.
• Lack of Diversity: Insufficient regulatory support for non-mainstream assets or innovative businesses may lead to a homogenized market.

5.Legal and Cybersecurity Risks

• Asset Security: While regulations emphasize private key management and asset segregation, vulnerabilities or external attacks could still result in losses.
• Delayed Regulation for Emerging Sectors: Slow regulatory responses to NFTs, GameFi, and other emerging sectors could create gray areas and increase risks.

Potential Policy Changes in Hong Kong’s Cryptocurrency Regulation

Hong Kong’s future regulatory changes may focus on strengthening stablecoin oversight and advancing the digital Hong Kong dollar (CBDC) application. As the global cryptocurrency market evolves rapidly, Hong Kong will likely engage with international organizations (e.g., G20) to develop global regulatory standards, ensuring alignment with international trends.

Simultaneously, Hong Kong may increase regional cooperation, aligning its regulatory framework with mainland China, the Greater Bay Area, and Southeast Asian markets to enhance cross-border transaction efficiency.

Policy updates could include new regulations for decentralized finance (DeFi) and Web3 applications to capture growth opportunities from emerging technologies. Hong Kong might also optimize its fintech sandbox program to lower compliance barriers for startups, encouraging innovation.

Overall, Hong Kong’s policy changes are expected to balance risk control while enhancing its competitiveness as a global cryptocurrency hub.

Coordination with Other Countries

While Hong Kong’s cryptocurrency regulations operate independently, global economic integration makes international coordination increasingly vital, especially within frameworks like the G20.

The G20 emphasizes the need for global cryptocurrency regulation. As a key financial hub in the Asia-Pacific region, Hong Kong may actively participate in discussions and adopt G20 recommendations to strengthen AML/CTF mechanisms and promote cross-border data sharing and regulatory technology collaboration.

Hong Kong may enhance cooperation with Asia-Pacific countries to standardize cross-border payment systems, particularly for digital assets and stablecoins. It could also learn from successful models in Singapore and Switzerland, adopting business-friendly tax policies and effective regulatory approaches for ICOs and DeFi.

As part of “One Country, Two Systems,” Hong Kong is well-positioned to collaborate on promoting the digital yuan (e-CNY) and digital Hong Kong dollar, particularly in cross-border payment applications.

Hong Kong may further align its policies with Financial Action Task Force (FATF) recommendations, ensuring local regulations meet global standards and boosting investor confidence.

Industry Outlook for 2025 & G20 Cryptocurrency Issues

The year 2025 is seen as a pivotal year for the cryptocurrency industry, marking a transition toward greater maturity and regulation. A series of events and technological breakthroughs are likely to shape the long-term trajectory of the industry over the next decade while also having profound impacts on the global financial system.

G20 Cryptocurrency Agenda

In 2025, the G20 is expected to finalize a unified regulatory framework for global stablecoins, significantly impacting their issuance, reserve requirements, and cross-border payment applications. The cryptocurrency market is also projected to undergo transformative growth in 2025, with key themes including macroeconomic trends, blockchain gaming, disruptive innovation, and shifts in user experience.

What is the G20 and its Cryptocurrency Agenda?

The G20 (Group of Twenty) is an international forum for economic cooperation established in 1999 to promote global economic stability and growth. It comprises 19 countries and the European Union, representing the world’s major developed and emerging market economies. The G20 accounts for approximately 85% of global GDP, 75% of international trade, and 60% of the global population.

Key Cryptocurrency Topics on the G20 Agenda:

1. Global Coordination of Regulatory Frameworks: Recognizing the global nature of cryptocurrencies, the G20 emphasizes the need for international regulatory coordination to prevent regulatory arbitrage and financial crimes. The G20 advocates for unified measures, particularly in AML and CTF compliance.
2. Financial Stability: The volatility and decentralized nature of cryptocurrencies have raised concerns about potential threats to financial stability. The G20 focuses on risks in the crypto market, especially stablecoins and DeFi, and their impact on traditional financial systems.
3. Data Privacy and Consumer Protection: As cryptocurrencies become more widespread, the G20 is increasingly focused on protecting consumer privacy and preventing risks such as fraud and theft. The decentralized nature of crypto assets challenges existing legal systems, prompting the G20 to encourage stronger oversight of virtual asset service providers (VASPs) to ensure user fund security.
4. Cross-Border Payments and Digital Currencies: The G20 explores the potential of blockchain technology to reduce costs and improve efficiency in cross-border payments. Additionally, with the launch of digital currencies like China’s digital yuan, the G20 examines the impact of CBDCs on international trade and financial systems.
5. Taxation: The G20 has discussed taxation issues related to cryptocurrencies, emphasizing transparency and information sharing to combat tax evasion and ensure compliance in crypto-asset transactions.

In summary, the G20 focuses on regulatory frameworks, financial stability, consumer protection, cross-border payments, and taxation to establish unified and effective policies for the global cryptocurrency market.

Six Key Events to Watch in the Cryptocurrency Market in 2025

1. New U.S. Administration: The new administration under Trump is expected to introduce new directions for financial regulation, potentially marking a turning point in crypto market oversight. Changes in the CFTC and SEC may lead to a more open and flexible regulatory approach, driving market development.
2. Ethereum Upgrades: Ethereum is set to implement several upgrades in 2025, including the full rollout of Danksharding and the “Pectra” update, significantly improving scalability and user experience.
3. Global Stablecoin Framework: The G20 is expected to complete its unified stablecoin regulatory framework, shaping stablecoin issuance, reserve requirements, and cross-border applications. This could spur transformative growth in the cryptocurrency market.
4. AI and Blockchain Convergence: Integrating AI and blockchain will drive technological innovation, particularly in AI wallets, decentralized AI agents, and AI training networks. These advancements are expected to yield new applications by 2025.
5. Mainstream Adoption of Crypto ETFs: Approving spot Bitcoin and Ethereum ETFs in the U.S. has attracted institutional capital. By 2025, more asset classes are likely to enter the ETF market.
6. Tokenization of Real-World Assets (RWA): In 2024, tokenized assets (excluding stablecoins) grew by over 60%, with companies exploring their use as collateral for other financial transactions. In 2025, the RWA market is expected to expand further into private credit, corporate bonds, real estate, and insurance.

Conclusion

Hong Kong’s regulatory policies in the cryptocurrency market balance innovation and risk control, offering significant opportunities for global and local markets. However, high entry barriers and international competition may reduce its appeal.

To thrive amid opportunities and risks, Hong Kong must adjust policies to foster innovation, strengthen alignment with international standards, and enhance regional collaboration, particularly with the Greater Bay Area.

Hong Kong’s cryptocurrency industry must focus on maintaining market vitality under a regulatory framework, aligning with the Greater Bay Area’s fintech development, and developing robust talent cultivation systems for local crypto expertise.

As the global crypto market evolves, especially in areas like ETFs and RWAs, Hong Kong must ensure policy flexibility and foresight to maintain financial stability while leaving room for innovation. This balance will determine whether Hong Kong can truly become Asia’s cryptocurrency financial hub.