The government however does not rule out reforming the regulatory regime on “virtual commodities” in the future.
The Hong Kong government maintained on Wednesday (9 November) that there was no intention to amend existing regulatory framework on virtual commodities and initial coin offerings (ICOs).
The statement was made in response to Finance lawmaker Chan Chun-ying’s question during Wednesday’s session regarding the legality of digital tokens, or cryptocurrencies with Bitcoin being the prime example. Chan wrote in October warning against the risks of ICOs and cryptocurrencies.
Earlier in September this year, the Chinese regulatory regimes have branded ICOs as “a form of unapproved and illegal public fund-raising” and announced that it was banning the practice. Hong Kong’s Securities and Futures Commission soon restated on the following day that as long as digital tokens function in a way that assembles the definition of “securities” under the Securities and Futures Ordinance, parties engaging in the business are required to be licensed by or registered with the SFC.
While reiterating the SFC’s stance on the subject, the government also noted that it did’t see digital tokens as currencies but a type of virtual commodities – hence no specific framework is needed. But it did not rule out the possibility of stepping up its regulatory measures if the new market continues to grow.
“Apart from those digital tokens falling within the definition of ‘securities’ under the Securities and Futures Ordinance, Hong Kong does not have any targeted regulatory measures on virtual commodities in respect of their safety or soundness, as well as the trading platforms or operators of such commodities,” the government’s reply read, adding that there are other ordinances and mechanisms in place to sanction against money laundering, terrorist financing, fraud and cyber-crimes.
“According to our understanding, virtual commodities have yet to be widely accepted as a medium of payment in Hong Kong as compared with other places, and their circulation as a medium of exchange in daily life or business transactions is insignificant. […] it is unlikely that virtual commodities will have a systemic impact on Hong Kong’s financial system at this moment,” the government asserted. “That said, the Government and regulators will continue to closely monitor the market development.”