Virtual Assets Report

INTRODUCTION 1 Virtual assets are digital representations of value that can be traded or used for investment or payment, not including digital versions of traditional financial assets such as currencies or securities.¹ Since cryptocurrencies and other types of virtual assets have gained popularity as investment vehicles, the Hong Kong SAR government has recognised their potential to promote innovation and growth in the financial sector and has taken steps to examine ways to support the healthy development of the virtual asset industry. On 31 October 2022, the Financial Services and the Treasury Bureau (FSTB) issued the Policy Statement on the Development of Virtual Assets in Hong Kong .² The statement set out the government’s policy stance, approach and regulatory system towards developing a vibrant sector and ecosystem for virtual assets in the city. One aspect of the government’s approach is to consider how retail investors may be given access to virtual assets under the licensing regime.³ To this end, virtual asset-related products such as exchange traded funds (ETFs) were considered for launch in Hong Kong.4 From a policy standpoint, these products would provide retail investors with exposure to virtual assets and offer connectivity between virtual asset players and conventional financial institutions, promoting financial innovations in the virtual assets sector. The subsequent year revealed unexpected market developments, including cer tain controversies and incidents related to virtual assets. These incidences led to a number of changes concerning the regulatory requirements for virtual asset activities that were set out in the circular issued jointly by the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) on 20 October 2023.5 Under this circular, Hong Kong-licensed virtual asset trading platforms are allowed to serve retail investors and virtual asset futures and ETFs are authorised for public offering in Hong Kong. In view of Hong Kong’s position as Asia’s virtual asset hub, we conducted a two-phase survey study between April and October 2023 to understand the attitudes of the Hong Kong population towards virtual assets. This report documents our findings on the public’s understanding and general perception of virtual assets, as well as their intentions and attitudes towards investing in virtual assets. 1. Financial Action Task Force (2021). Updated Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers . https://www.fatf-gafi.org/content/fatf-gafi/en/publications/Fatfrecommendations/Guidance-rba- virtual-assets-2021.html 2. Financial Services and the Treasury Bureau (2022, 31 October). Policy Statement on Development of Virtual Assets in Hong Kong . https://gia.info.gov.hk/general/202210/31/P2022103000454_404805_1_1667173469522.pdf 3. Ibid. 4. Securities and Futures Commission (2022, 31 October). Circular on Virtual Asset Futures Exchange Traded Funds. https://apps.sfc.hk/edistributionWeb/api/circular/openFile?lang=EN&refNo=22EC60 5. Securities and Futures Commission (2023, 25 October). Joint circular on intermediaries’ Virtual Asset-Related Activities. https://apps.sfc.hk/edistributionWeb/gateway/EN/circular/intermediaries/supervision/doc?refNo=23EC44 INTRODUCTION