Hong Kong’s Treasury Department, meanwhile, said in a separate statement that cryptocurrency is not a ‘target asset’ of the Exchange Fund. Local Councilor Johnny Ng suggested that the Hong Kong government consider including cryptocurrencies in its fiscal reserves.
He hopes the Hong Kong Exchange Fund, which owns some of the stock, will be willing to assign some of its liabilities to crypto assets. In fact, he noted the growth potential of cryptocurrencies and their potential to help the country diversify its financial reserves.
In its written response to Ng’s request, the Secretary for Financial Services and the Treasury, Joseph Chan, said: ‘Such activities by crypto assets do not conform to Hong Kong Government’s current investment strategy for the Exchange Fund.’
Hong Kong’s Crypto Holdings In Exchange Fund Are Minimal
The fund has a small amount of crypto assets, which is very little compared to the overall portfolio. The government doesn’t treat it as the main asset class of the reserve fund, he said.
Chan told the Legislative Council that the Exchange Fund’s crypto investments are managed by external investment managers. Their job is to diversify their portfolio across different asset-class countries. Chan noted that the amount of crypto holdings is ‘very small,’ stressing that the Exchange Fund’s priorities are more traditional, more stable assets.
Chan also cited Hong Kong’s wider stance on cryptocurrencies and virtual assets. In October 2022, Hong Kong authorities, in the ‘Policy Declaration on the Development of Virtual Assets in Hong Kong’, spelt out a regulatory framework for crypto activity in Hong Kong, which they made clear to crypto companies.
However, Chan said virtual assets are subject to the same regulatory standards as other financial services under this framework, which follows the same business, risks, and rules framework.
However, it has expanded to the licensure of virtual asset service providers in Hong Kong. Amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance Bill relating to crypto trading have provided a lifeline to the regulatory attitude the region is taking towards the still relatively new crypto sector.
The industry is growing rapidly globally. Even the government will speed up its work on regulating crypto, but Chan didn’t reveal what it will do. He stressed, however, that he would facilitate such virtual assets as a source of financial innovation and that the stumbling block for the broader financial system is the potential those virtual assets bring.
Hong Kong’s big, if hesitant, step on cryptocurrency investments is the Treasury Department’s saying that it’s still only taking control of cryptocurrency investments and keeping them consistent with wide international standards.
On that track, the government is adopting this position in a way that can, on the one hand, provide opportunities in digital assets while, on the other hand, setting up a mechanism to manage the risks.
Hong Kong is the gateway between East and West, and its method of regulating the global cryptocurrency space and sensitivity to viewing crypto properties as part of Hong Kong’s much broader monetary plan will be heard by financiers and policymakers alike.
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