The city, which had previously proposed to limit crypto trading to professional investors, has seen planned rules for digital assets come under heavy criticism for stifling innovation, prompting a large number of start-ups to move to d other markets such as Singapore and Dubai.
The authorities will launch a consultation process on the possibility of giving retail investors “an appropriate degree of access” to virtual assets, financial secretary Paul Chan said in a keynote speech broadcast at the Hong Kong Fintech Week conference.
“We want our policy position to be clear to the global marketplace, to demonstrate our commitment to exploring fintech with the global virtual asset community,” he said.
The government will also examine the ownership rights of token assets and explore the possibility of legalizing so-called smart contracts – self-executing transactions whose outcomes depend on pre-programmed inputs.
These moves are likely to pave the way for security token offerings (STOs) in real estate, industry players have said. STOs are blockchain-based tokens that represent proprietary interests or entitle income or dividends generated by real assets.
The latest announcement could put Hong Kong’s rules on par with Singapore’s, said Andy Mehan, chief compliance officer for APAC at US cryptocurrency exchange Gemini.
“Industry participants want to see consistency in the global regulatory regime, otherwise there will be opportunities for bad actors to exploit loopholes in jurisdictions with less rigid laws,” he said.
Legalizing cryptocurrency retail would also make Hong Kong stand out further from mainland China, which has imposed a blanket ban on cryptocurrency trading.
“This is a positive move as it sends a strong message that Hong Kong is taking a different approach to regulating its capital market,” said Adrian Wang, chief executive of cryptocurrency broker Metapha.
($1 = HK$7.8492)