Hong Kong lawmaker Johnny Ng initiated a debate in the Legislative Council today, addressing the increasing global prominence of cryptocurrencies, particularly Bitcoin (BTC). Ng’s inquiries come at a time when countries like the US are speculated to be exploring the creation of Bitcoin-focused strategic reserves.
Bitcoin Takes Center Stage in Hong Kong Legislative Council
Ng posed a series of questions about digital assets to Hong Kong’s Acting Secretary for Financial Services and the Treasury, Joseph Chan. The questions centered on whether the Hong Kong government plans to accelerate improvements to its regulatory framework for cryptocurrencies, given the growing adoption of crypto worldwide.
In response, Chan acknowledged the increasing interconnectedness between traditional financial systems and virtual asset markets. He referenced the Financial Stability Board’s (FSB) finalized global regulatory framework for crypto activities, published in July 2023 in consultation with relevant standard-setting bodies (SSBs). He explained:
The framework provides recommendations relating to the regulation, supervision and oversight of crypto-asset activities and markets as well as global stablecoin arrangements. As a leading international financial centre in Asia, Hong Kong has key influence in the regulation and development of VA.
Ng also raised the issue of Bitcoin’s growing global recognition as a digital asset, despite its inherent risks. He asked whether the government is considering including digital assets in its fiscal reserves and whether the Exchange Fund – the investment arm of the Hong Kong Monetary Authority (HKMA) – could be used to accumulate BTC.
In response, Chan clarified that the Exchange Fund primarily invests in globally diversified asset classes to minimize risks and enhance long-term returns. While crypto assets are not explicitly included in the Exchange Fund’s investments, Chan acknowledged that external managers employed by HKMA might have minimal exposure to crypto assets as part of their diversified portfolios.
Additionally, Chan stressed that the government remains open to fostering innovation in blockchain and digital assets while maintaining financial stability. He highlighted ongoing collaborations between regulators and industry stakeholders to ensure a balanced approach that supports growth while addressing potential risks. Such measures aim to solidify Hong Kong’s reputation as a global crypto hub.
Bitcoin As A Strategic Reserve And Its Impact On Hong Kong
Ng’s final question focused on the potential implications for Hong Kong and China if foreign nations were to position Bitcoin as a strategic reserve asset. He specifically inquired about potential consequences for the Hong Kong dollar and the broader economy.
Chan responded by emphasizing the resilience of Hong Kong’s Linked Exchange Rate System (LERS), which has withstood numerous global economic crises over the past four decades. While he highlighted the potential of blockchain technology to enhance efficiency and transparency in financial activities, he also warned of the risks associated with virtual assets, including their use in illicit activities like money laundering.
That said, Hong Kong continues to make strides in the digital assets space. Recently, the government announced plans to offer tax exemptions on investments in crypto assets and other alternative assets in a bid to attract global liquidity to the region.
Similarly, Hong Kong’s largest digital bank called ZA Bank recently unveiled a digital assets trading service – a move that underscores the region’s commitment to positioning itself as a global hub for digital finance. At press time, BTC trades at $100,850, up 5.9% in the past 24 hours.
