Core Viewpoint - Hong Kong must find the best balance between regulation and innovation in the virtual asset sector to ensure policies keep pace with developments while maintaining market order and transparency, avoiding stifling market vitality and participant enthusiasm [2][8]. Regulatory Developments - The Hong Kong government is considering introducing virtual asset derivatives trading for professional investors, along with robust risk management measures to enhance product options while ensuring orderly and transparent trading [3][4]. - A second policy declaration on the development of virtual assets will be published, outlining the government's vision and direction, including the integration of traditional financial services with virtual asset technology [3][5]. Market Growth and Diversification - Hong Kong's financial ecosystem is diversifying, with over 1,100 fintech companies, including eight licensed digital banks, four virtual insurance companies, and ten virtual asset trading platforms [3][4]. - The Hong Kong Securities and Futures Commission (SFC) has approved the first virtual asset futures ETFs for retail investors in December 2022 and plans to recognize the first virtual asset spot ETFs in April 2024 [3][4]. Future Outlook - The upcoming policy declaration is expected to complement the SFC's roadmap, establishing a stable foundation for the orderly development of virtual assets in Hong Kong [5]. - The legal community anticipates that the new policy will address the evolving landscape of virtual assets and digital currencies, potentially incorporating topics like tokenization and artificial intelligence [7][8].

Core Viewpoint - Hong Kong's Financial Services and the Treasury Bureau plans to release a second policy declaration on virtual assets, focusing on integrating traditional financial services with technological innovations in the virtual asset sector, while enhancing the safety and flexibility of real economic activities [1] Group 1: Regulatory Developments - Licensed virtual asset trading platform operators must conduct due diligence on any virtual assets before offering them for trading, ensuring they meet all criteria and have high liquidity [1] - The Hong Kong Securities and Futures Commission (SFC) will continuously assess risks related to virtual assets, including volatility and market manipulation, and will monitor international regulatory developments [1][2] - The SFC has recognized the first virtual asset futures exchange-traded funds (ETFs) for retail investors in December 2022 and the first spot ETFs in April 2024, enhancing the variety of products available in Hong Kong's market [2] Group 2: Market Expansion and Innovation - The SFC's "ASPIRe" roadmap aims to enhance the security, innovation, and growth of Hong Kong's virtual asset market, focusing on expanding the types of virtual asset products and services while ensuring investor protection [3] - The SFC is considering introducing virtual asset derivatives trading for professional investors, along with robust risk management measures to ensure orderly and transparent trading [3] Group 3: Attracting Financial Technology Enterprises - The Hong Kong government has established a one-stop service through the Hong Kong Financial Technology Office to attract international fintech companies, providing assistance with licensing and regulatory frameworks [4] - Tax incentives and funding information will be shared with enterprises, and efforts will be made to connect them with educational institutions and research organizations [4] - Hong Kong's financial institutions have the highest usage rate of generative AI among global markets at 38%, significantly above the global average of 26% [4]