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)
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.
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
2016–2017: Policy Liberalization Stage
2018–2021: Regulatory Framework Establishment Stage
2022–Present: Full Opening Stage
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 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.
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.
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:
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).
The first and most important step is the Mandatory VASP Licensing Regime. The SFC issues ten types of financial licenses:
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.
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:
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:
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:
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):
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
6.Special Policies
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.
1.Hong Kong’s Cryptocurrency Policies
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:
Impact on Market Development
Impact on Global Competitive Landscape
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:
1.Attracting Global Crypto Enterprises
2.Fostering Innovation and Technological Development
3.Attracting Institutional Investors
4.Connecting Mainland and Global Markets
1.High Regulatory Barriers Restrict Market Dynamism
2.Intensified International Competition
3.Regulatory Uncertainty and Policy Risks
4.Market Concentration Risk
5.Legal and Cybersecurity Risks
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.
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.
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.
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:
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.
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.
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)
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.
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
2016–2017: Policy Liberalization Stage
2018–2021: Regulatory Framework Establishment Stage
2022–Present: Full Opening Stage
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 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.
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.
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:
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).
The first and most important step is the Mandatory VASP Licensing Regime. The SFC issues ten types of financial licenses:
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.
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:
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:
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:
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):
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
6.Special Policies
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.
1.Hong Kong’s Cryptocurrency Policies
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:
Impact on Market Development
Impact on Global Competitive Landscape
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:
1.Attracting Global Crypto Enterprises
2.Fostering Innovation and Technological Development
3.Attracting Institutional Investors
4.Connecting Mainland and Global Markets
1.High Regulatory Barriers Restrict Market Dynamism
2.Intensified International Competition
3.Regulatory Uncertainty and Policy Risks
4.Market Concentration Risk
5.Legal and Cybersecurity Risks
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.
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.
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.
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:
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.
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.