Those People’s Bank of China (PBOC), the country’s central bank, highlighted global efforts to regulate digital assets in its annual financial stability report for 2024, while also noting that Hong Kong is “actively exploring” a digital asset licensing regime.
Those China Financial Stability ReportPublished on December 27, includes a section dedicated to digital assets, in which the PBOC pointed out that 51 jurisdictions worldwide have issued bans or restrictions on digital assets. Specifically, it mentioned how some economies have adapted existing laws, such as Switzerland and the United Kingdom, while others have introduced new legislation, notably the European Union Markets for Crypto Assets Regulation (MiCAR).
In September 2021, the PBOC, together with nine other Chinese regulators, the “Note on Further Prevention and Management of the Risks of Crypto Trading No. 237“, which effectively banned digital assets in the country.
The notice stated that digital assets are not legal tender in China, that digital asset transactions are illegal, and that all entities and individuals involved in the trading of digital assets may face administrative and criminal penalties. The notice was the most comprehensive digital asset regulation in China to date, and the ban even went so far as to say that the provision of online services to Chinese residents via overseas digital asset trading platforms is considered illegal and subject to criminal liability.
However, unlike the mainland ban, the trade of digital assets are legal in the Hong Kong Special Administrative Region.
In June 2023, Hong Kong launched a digital asset licensing regime for trading platforms, allowing licensed exchanges to offer retail trading services. More recently, in August 2024, the Hong Kong Legislative Council appeared to double down on its intention to make the region a crypto hub, with council member David Chiu to announce Plans to introduce strengthened digital asset regulations in the next 18 months.
According to Chui, the Hong Kong government aims to improve the supervision and enforcement of legislation related to digital asset financial products, including stablecoins. He added that sandbox testing has already been done to establish the best form the impending legislation should take.
The PBOC Financial Stability Report notes that Hong Kong also requires large financial institutions, such as HSBC (NASDAQ: HSBC) and Standard Chartered Bank (NASDAQ: SCBFF), included digital asset transactions in their routine customer monitoring.
The central bank also suggested that it is working to improve an international regulatory framework for digital assets, such as recommended of the Financial Stability Board (FSB) – an international body that monitors and makes recommendations on the global financial system – in its July 2023 publication “global regulatory framework for crypto-asset activities“.
“Overall, the links between crypto-activities and systemically important financial institutions, core financial markets and market infrastructures may be limited,” the PBOC said. “However, cryptocurrencies may pose risks in some economies, as the application scenarios of cryptocurrencies in payments and retail investments increase.”
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