Hong Kong’s Legislative Council member Johnny NG Kit-Chong announced that the council is actively seeking insights from global industry leaders to formulate policy recommendations and guide discussions on the future of Web3 and digital assets. This effort is part of a broader initiative to position Hong Kong as a leading hub for technological innovation in the Web3 and digital asset sectors.
Formation of the Web3 and Virtual Asset Development Subcommittee
In a recent post on X, it was revealed that the Legislative Council has established a Subcommittee on Web3 and Virtual Asset Development. This subcommittee is tasked with promoting the growth and development of Web3 technologies and digital assets in Hong Kong. By gathering feedback from international stakeholders, the council aims to craft policies that will foster a robust and innovative environment for these emerging technologies.
The council is inviting feedback on several critical areas of Web3 policy development. These include balancing technical, legal, and regulatory frameworks to create a cohesive environment that supports Web3 growth while maintaining robust and clear regulations. Additionally, the subcommittee seeks to enhance international cooperation to ensure Hong Kong remains a globally connected hub for Web3 innovation.
Specific Policy Areas Under Review:
- Technical and Regulatory Balance: Creating a unified environment for Web3 development.
- International Cooperation: Strengthening Hong Kong’s global connections in Web3.
- AI and Web3 Convergence: Exploring regulatory improvements for AI through Web3 technologies.
- Decentralized Autonomous Organizations (DAOs): Supporting the development and regulation of DAOs.
- Talent Development: Attracting and nurturing talent in Web3 and financial innovation.
Digital Asset Industry and Investor Protection
Beyond Web3 policy, the Legislative Council is also focusing on the digital asset industry. The goal is to identify measures that will facilitate the industry’s growth in Hong Kong. This includes enhancing investor and consumer protection, boosting market confidence, and safeguarding the interests of digital asset investors.
Critical Considerations for the Digital Asset Sector:
- Investor and Consumer Protection: Ensuring safety and confidence in digital asset markets.
- Stablecoins: Evaluating the benefits and risks to develop balanced regulatory frameworks.
- Professional Custody Services: Addressing the need for secure and regulated custody solutions for virtual assets.
Stablecoins, given their potential impact on financial stability, are a significant focus for the council. The council aims to develop regulatory frameworks that balance financial stability with the need for innovation in the stablecoin sector. This includes assessing the potential benefits and risks associated with their use.
In July 2023, the Hong Kong government formed a task force consisting of 15 industry participants and 11 key government officials. This task force is responsible for overseeing the development of Web3 and ensuring its ethical promotion. This collaborative approach aims to foster a conducive environment for the growth of Web3 technologies and digital assets.
Challenges Facing the Crypto Sector
Despite these proactive measures, the number of crypto exchanges seeking operational licenses in Hong Kong has been declining. Notably, on May 13, crypto exchanges IBTCEX and QuanXLab withdrew their license applications, which they initially filed in February 2024. This trend suggests that while Hong Kong is pushing for innovation, challenges remain in achieving widespread industry adoption and regulatory compliance.
The Legislative Council’s initiative to seek global input on Web3 and digital asset policies represents a significant step towards making Hong Kong a leading center for digital innovation. By focusing on creating balanced regulatory frameworks and fostering international cooperation, Hong Kong aims to attract and nurture talent, support the development of DAOs, and ensure robust investor protections. The ongoing dialogue with industry stakeholders will be crucial in shaping policies that support growth while mitigating risks in this rapidly evolving sector.
Featured image credit: Tanarat Kongchuenjit via Vecteezy