"Hong Kong Digital Asset Development Policy Declaration 2.0" - Law Firm Interpretation

In June 2025, the Hong Kong SAR government released the "Digital Asset Development Policy Declaration 2.0", using Real World Asset (RWA) tokenization as a cornerstone to break down the barriers between TradFi and digital assets, leveraging compliance stablecoins as a fulcrum to drive changes in the payment system, and constructing an innovative paradigm of "digital asset services for the real economy." Hong Kong is attempting to redefine the core competitiveness of international financial centers through tokenization technology.

1. Government-led tokenization: From experimental fields to mainstream markets

The strategic core of Hong Kong is for the government to personally drive the implementation of tokenization technology to inject strong confidence into the market.

Firstly, the tokenization of sovereign bonds is being normalized. Following the successful issuance of two batches of tokenized green bonds totaling HKD 6.8 billion, the government announced that it will normalize their issuance and explore multi-currency and multi-term structures. The goal is to provide the market with "stable and high-quality digital bonds"—this is not only a technical validation but also aims to provide global institutional investors with low-risk, high-credit anchor assets.

Second, build tokenization infrastructure. The Monetary Authority's Ensemble project, in collaboration with the Securities and Futures Commission, aims to create an interbank tokenized deposit settlement system to address the pain points of fund circulation efficiency; Hong Kong Stock Exchange Digital Asset Index: Launching Bitcoin and Ethereum pricing benchmarks for the Asian time zone to provide a valuation reference for tokenized assets.

Third, precise implementation of policy dividends. Tax exemptions, clarify that tokenized ETFs enjoy the same stamp duty exemptions as traditional ETFs; promote legislation to include designated digital assets in the scope of capital gains tax exemptions for private funds and family investments (effective in the 2025/26 fiscal year). Incubation support, Cyberport launches the "Blockchain and Digital Asset Pilot Funding Scheme," prioritizing funding for landmark projects such as RWA, payment and clearing.

The government endorses tokenization technology with its own credit and promotes the upgrade of tokenization from "experimental innovation" to "scalable commercial practice" through a three-pronged approach of reducing compliance costs, providing infrastructure, and releasing fiscal and tax dividends, reflecting profound policy intentions.

2. RWA Expansion: Redefining the Boundaries of Asset Liquidity

The declaration views the tokenization of real-world assets as the core hub connecting TradFi and digital assets, with a highly proactive layout:

| | | | | --- | --- | --- | | Asset Class | Specific Measures | Innovative Value | | Commodities | Promote the tokenization of LME Hong Kong registered metal warehouse receipts, applying physical asset tracking technology | Solve the issues of ownership verification and circulation efficiency in commodity trading | | Precious Metals | Focus on expanding tokenization of precious metals such as gold | Provide an on-chain entry for risk-averse capital | | Renewable Energy | Explore the tokenization of green assets such as solar panel revenue rights | Activate ESG finance to attract sustainable investment | | TradFi Products | Encourage tokenization of money market funds and ETFs, explore secondary market trading | Enhance liquidity of fund shares, lower retail participation thresholds | | Entity Income Rights | Tokenization of revenue streams from Ensemble project's pilot electric vehicle charging stations | Providing a new pathway for the securitization of small and medium-sized real assets |

Hong Kong is no longer limited to the tokenization of financial assets, but has also included the rights to physical assets such as factory warehouse receipts, charging piles, and solar panels. Essentially, it is reconstructing the mapping relationship between the "real economy and financial assets" on the blockchain, creating liquidity for trillions of non-standard assets, and making a revolutionary breakthrough in promoting the integration of digital and physical assets.

3. Stablecoin System: The "Icebreaker" of Payment System Reform

The "stablecoin issuer regulatory system" implemented on August 1, 2025, is Hong Kong's strategic weapon to break through the traditional payment system.

First, strict regulation shapes market trust. Institutional requirements for the custody of reserve assets (must fully cover the circulating volume at 100%), stability mechanisms (algorithmic stablecoins are excluded), redemption processes (T+0 real-time settlement), and risk management (regular stress testing) implement penetrating supervision to thoroughly address the trust crisis of stablecoins.

Second, the government personally promotes the implementation of scenarios. Publicly solicit government application plans (such as tax payment, subsidy distribution) to establish usage inertia with public payments as the breakthrough. Focus on supporting cross-border trade settlement scenarios to address the pain points of high exchange rate losses and long clearing cycles for small and medium-sized enterprises.

Thirdly, form a strategic synergy with tokenization. The integration of payment and settlement means using stablecoins to settle tokenized bond interest and RWA profit distribution, achieving a closed loop of "asset generation - cash flow distribution." Cross-border arbitrage elimination means enterprises can use stablecoins to directly pay for LME tokenized metal warehouse receipts, avoiding multiple currency conversion costs.

If the compliance stablecoin in Hong Kong can be implemented in cross-border trade, government payments, and DeFi clearing scenarios, it will directly challenge the payment intermediary status of SWIFT and traditional commercial banks. Its core advantages lie in cost reduction (over 50% lower than traditional cross-border payments) and efficiency leap (settlement speed from T+2 to T+0), which will lead to disruptive changes.

4. The Integration Path of TradFi and Digital Assets

Hong Kong's innovation lies in building a three-in-one integration paradigm of "traditional assets-tokenization-stablecoin circulation:"

First is the institutional entry channel. By tokenizing high-credit assets such as government bonds and LME warehouse receipts, conservative financial institutions are attracted to enter the market. The unified custody standards of the Securities Regulatory Commission (banks are regulated by the Monetary Authority) address the concerns of institutional clients regarding private key management risks.

Liquidity Layering Design

| | | | | --- | --- | --- | | Level | Tool | Target User | | Bond Funds | Tokenization of government bonds, public funds | Sovereign funds, pension funds | | Commodities | tokenization of metal warehouse receipts, REITs | Hedge funds, family offices | | Others | tokenization ETF, charging pile income rights | Retail investors, financial advisor platforms |

Third, a new hub for cross-border finance. Relying on stablecoins + tokenized assets, Hong Kong can provide: African mining companies → tokenization of Hong Kong LME warehouse receipts → stablecoin payments to Southeast Asian factories. Middle Eastern sovereign funds → subscription to tokenized green bonds in Hong Kong → receiving on-chain stablecoin interest. These types of services will reshape Hong Kong's role beyond being an offshore RMB center — a global liquidity hub for digital assets.

5. Risks and Challenges: Unresolved Questions of the Hong Kong Plan

Despite the clear path, Hong Kong still needs to face three major challenges.

First, there is a gap in legal adaptability. Current relevant laws, such as the "Bill of Exchange Ordinance" and the "Goods Sale Ordinance," do not clearly define "tokenized asset ownership." Although the Financial Services and the Treasury Bureau and other institutions have initiated legal reviews, the legislative amendment process may lag behind market innovations.

Second, the collaborative resistance of financial institutions. Traditional banks have a certain degree of conflict of interest with blockchain in tokenization deposits and stablecoin clearing business (such as reducing cross-border payment revenue). The Ensemble project needs to balance disruptive innovation with vested interests.

Third, geopolitical variables. The cross-border payment of stablecoins may need to carefully handle the competitive relationship with the mainland digital RMB (e-CNY), and ensure proper coordination and alignment of relevant policies and technologies.

6. The "Hong Kong Experiment" to Restructure the Financial Value Chain

The essence of the "Policy Declaration 2.0" is a revolution in financial engineering led by national power.

Asset side, through RWA tokenization, convert elements of the real economy such as bonds, commodities, and renewable energy into on-chain liquidity;

Payment end, breaking through the barriers of traditional cross-border settlement using compliant stablecoins;

Ecological end, reduce market innovation costs through tax incentives and infrastructure investment.

Hong Kong's strategic goal is not only to become a "digital asset center," but also to use tokenization as a tool to restructure the value chain of global asset issuance, trading, and clearing. If it successfully connects the closed loop of "real assets → on-chain tokens → stablecoin circulation," a brand new digital financial network parallel to the traditional financial system will be born. We believe this will determine Hong Kong's ability to maintain its status as an international financial hub in the blockchain era and will provide the best practice case for the "digital migration of the traditional financial system" globally.

Official link network of the Hong Kong Special Administrative Region Government "Policy Declaration on the Development of Digital Assets in Hong Kong 2.0":