Hong Kong’s government recently released the "Hong Kong Digital Asset Development Policy Declaration 2.0," which notably replaces the term "virtual assets" with "digital assets." This shift raises an important question: should Taiwan consider a similar change in terminology?
This move is part of Hong Kong’s broader strategy to establish itself as a "digital financial hub." The declaration is structured around four core principles—Legal, Expanding, Advancing, and People (LEAP)—aimed at comprehensively promoting the development of digital assets.
A key focus is the implementation of a comprehensive licensing system by the Securities and Futures Commission (SFC) for exchanges, custodians, and stablecoin issuers. Starting August 1, stablecoins will also be fully regulated and require licensing.
The terminology change from "virtual" to "digital" is significant. It aims to reduce the perceived instability associated with the word "virtual" and instead emphasize the potential of digital assets to operate alongside traditional finance. As one official noted, the new term sounds more positive and reflects Hong Kong’s ambition to digitalize the entire financial product ecosystem, not just cryptocurrencies.
Taiwan’s Current Stance on Terminology
In Taiwan, regulatory bodies like the Financial Supervisory Commission (FSC) commonly use the term "virtual assets" or "virtual currencies." For instance, the recently proposed "Virtual Asset Service Act" employs this terminology.
Whether Hong Kong’s decision will influence Taiwan’s regulatory language remains to be seen. However, the more pressing issue is the difference in regulatory philosophy between the two regions.
Contrasting Approaches: Innovation vs. Risk Prevention
Hong Kong has adopted a proactive stance, actively encouraging financial innovation and digital asset development. In contrast, Taiwan tends to prioritize risk prevention over innovation. This cautious approach helps mitigate potential threats but may also cause Taiwan to miss out on growth opportunities in the rapidly evolving Web3 landscape.
Finding a balance that suits Taiwan’s unique economic and industrial environment is crucial. Stakeholders must collaborate to develop a framework that fosters innovation while ensuring stability.
Key Details of Hong Kong’s Policy Declaration 2.0
Legal and Regulatory Optimization (L)
The declaration proposes a unified and comprehensive framework for digital asset service providers, covering trading platforms, stablecoin issuers, custodians, and other trading services. The SFC will serve as the primary licensing authority, while the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) will review existing laws. The goal is to advance real-world asset (RWA) tokenization and bond tokenization in line with the latest guidelines from the International Organization of Securities Commissions (IOSCO) and the Financial Stability Board (FSB).
Expansion of Tokenized Products (E)
The government plans to transition tokenized government bond issuance from experimental to regular operations. It also aims to clarify stamp duty arrangements for tokenized ETFs, facilitating secondary market trading on licensed digital asset platforms. Additionally, market participants are encouraged to tokenize diverse assets, such as gold, non-ferrous metals, and revenue rights from renewable energy or electric vehicle charging stations. These efforts demonstrate how blockchain technology can reduce settlement costs and enhance transparency.
Application Scenarios and Cross-Border Collaboration (A & P)
The "A" and "P" components focus on application scenarios and talent collaboration, respectively. The stablecoin issuer licensing system will take effect on August 1, 2025, and the government welcomes proposals from licensed institutions for public or commercial applications. Cyberport will launch a blockchain and digital asset pilot funding scheme to support market-influential projects. Hong Kong will also collaborate with academic institutions and international partners to cultivate entrepreneurs, researchers, and technical experts, injecting talent into the industry chain.
Official Vision and Statements
Financial Secretary Paul Chan emphasized in a government press release:
"Digital assets are a vital part of fintech. This declaration demonstrates our support for innovation combined with robust regulation, enabling the digital asset ecosystem to connect closely with the real economy."
Secretary for Financial Services and the Treasury Christopher Hui added:
"The new framework positions Hong Kong at the forefront of digital transformation, providing a clear roadmap for businesses and investors."
The FSTB and SFC will conduct public consultations on the trading and custody licensing mechanisms, with details to be announced later. Through the LEAP framework, Hong Kong aims to drive innovation while ensuring controllable risks, further consolidating its status as an international financial center.
The "Hong Kong Digital Asset Development Policy Declaration 2.0" signals Hong Kong’s accelerated embrace of blockchain and cryptocurrencies. It offers global industry players a new gateway into the Asian market and injects fresh vitality into the local financial system.
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Frequently Asked Questions
What is the difference between "virtual assets" and "digital assets"?
The term "virtual assets" often implies intangible or non-physical assets, sometimes with connotations of instability. "Digital assets" is a broader term that includes cryptocurrencies, tokenized real-world assets, and other digitized financial products, emphasizing their integration with traditional finance.
Why did Hong Kong change its terminology?
Hong Kong renamed "virtual assets" to "digital assets" to present a more positive and stable image. The new term aligns with the region’s goal of becoming a digital financial hub and reflects its focus on digitizing the entire financial ecosystem.
Will Taiwan follow Hong Kong’s example?
It is uncertain whether Taiwan will adopt similar terminology changes. Taiwan’s regulatory approach is generally more cautious, prioritizing risk prevention. However, Hong Kong’s move may influence discussions among Taiwanese policymakers.
How does Hong Kong’s new policy affect stablecoin regulations?
Starting August 1, 2025, stablecoin issuers in Hong Kong must obtain a license. This is part of a comprehensive regulatory framework aimed at ensuring stability and protecting investors.
What are the benefits of tokenizing assets?
Tokenization can lower settlement costs, increase transparency, and provide fractional ownership of high-value assets. It also enables new financial products and services, such as tokenized bonds and ETFs.
How can businesses participate in Hong Kong’s digital asset ecosystem?
Businesses can apply for licenses as digital asset service providers, participate in tokenization projects, or collaborate with government-backed initiatives like Cyberport’s pilot funding scheme.