Hong Kong Regulator Chief Describes Bitcoin as an Alternative Financial Asset

Having weathered several cycles of booms and busts over 15 years, Bitcoin has demonstrated resilience as an alternative asset, according to a statement by Julia Leung, head of Hong Kong’s Securities and Futures Commission (SFC).

She expressed disagreement with the assertions of “most central banks and economists” regarding the lack of intrinsic value in the first cryptocurrency.

“Moreover, it is clear that the underlying DLT technology is here to stay,” Leung added.

The CEO of SFC outlined several advantages of blockchain application in the financial sector for the tokenization of real assets and securities. In her view, this could potentially:

• increase their accessibility to retail investors through fractionalization;
• provide both transparency and confidentiality for transaction parties through encryption;
• reduce costs by enhancing the efficiency of distribution, settlement, clearing, and custody.

Leung acknowledged that scaling the DLT ecosystem requires interoperability between financial institutions’ blockchains and unified global regulation of the sector.

As successful examples of technology implementation in Hong Kong, she cited the issuance of digital “green” bonds by authorities, gold-based tokens, and the launch of spot cryptocurrency ETFs.

However, Leung emphasized that the regulator’s support for the Web3 ecosystem “should not be seen as an endorsement of virtual currencies as an asset class.”

“Currently, they are highly speculative with extreme price volatility. Therefore, in meeting investor demand, we have ensured the implementation of extensive measures for their protection,” stated the head of SFC.

Among the measures taken for this purpose, she mentioned the licensing of centralized exchanges and the prohibition of operators using unregulated trading platforms and custodians for ETFs.

The SFC is also preparing rules for over-the-counter cryptocurrency trading and is considering the introduction of mandatory 100% backing for stablecoins.

Earlier in 2023, the Hong Kong government established a task force to promote the development of Web3.