Policy dividends spur new tracks: Hong Kong brokerages outline a new landscape for encryption finance.

Jessy, Golden Finance

Original title: The 2.0 Era of Digital Assets in Hong Kong: Is it the Spring for Brokerages?

On June 26, Hong Kong released the "Hong Kong Digital Asset Development Policy Declaration 2.0," proposing the "LEAP" framework, aimed at establishing Hong Kong as a global leading digital asset center.

As a result, on the Hong Kong stock market, Guotai Junan International, as the first Hong Kong-based brokerage to provide comprehensive virtual asset trading services, saw its stock price rise from HKD 1.24 to a high of HKD 7.02 within two trading days on June 25 and 26, ultimately closing at HKD 3.54. Driven by Guotai Junan International, the Hong Kong-based brokerage index surged by 11.75% in a single day. Tianfeng International, a subsidiary of Tianfeng Securities, obtained a virtual asset trading license, which also led to its A-share stock price hitting the upper limit. Shengli Securities, as the first brokerage to achieve coin-in and coin-out services, had a maximum increase of 160% in its stock price on the 26th.

On the day following the announcement, Hong Kong's first daily redeemable tokenized security was officially launched. It is reported that GF Securities (Hong Kong), as the first broker to issue tokenized securities in Hong Kong, has now launched the first daily redeemable tokenized security "GF Token". However, this product is a privately offered tokenized money market fund and is only available to qualified institutional investors.

Trading virtual assets on brokerage platforms and tokenized securities may just be a starting point; in the future, more traditional brokerages might bring further innovations to the crypto space.

New Opportunities for Brokers under the LEAP Framework

The "LEAP" framework proposed in "Declaration 2.0" outlines a clear development path for the Hong Kong digital asset market and opens up unprecedented business growth opportunities for traditional brokerages. The impact of this declaration on brokerages lies in providing clear policy endorsement, lowering compliance thresholds, and indicating directions for business innovation.

Specifically, "L" (Law) emphasizes the improvement of the regulatory framework. For brokerages, this means there are clearer rules to follow when engaging in virtual asset trading, custody, issuance, and other businesses.

"E" (Ecology) aims to build an ecosystem that integrates Web3 and traditional finance. Brokers, as important hubs in the traditional financial market, will be deeply integrated into this ecosystem. This is not just about adding a "crypto trading" section; it also means that brokers can participate in a broader digital asset lifecycle, including but not limited to connecting traditional investors with digital assets, providing comprehensive wealth management based on tokenized assets, offering investment banking services for digital asset projects, and developing innovative financial products, among others.

"A" (Asset) focuses on the development of tokenized and other new types of assets. The declaration regards RWA tokenization as a key industry, with physical assets such as precious metals, green energy, and warehouse receipts potentially being represented on the blockchain in future Hong Kong. In the RWA sector, brokerages can participate in RWA issuance and management, serving as underwriters and providing related consulting services, which helps optimize the income structure of brokerages and open up new profit growth points. The "GF Token" rapidly launched by Guotai Junan Securities (Hong Kong) is an example. In the future, we should expect to see more tokenized bonds, fund shares, private equity, and even complex derivatives structures led by brokerages, greatly enriching their product lines and service ranges.

"P" (Partnership) emphasizes regional and international cooperation. Hong Kong brokers may seize this opportunity to establish partnerships with leading international digital asset service providers, technology providers, and global projects seeking compliant channels, thereby enhancing their competitiveness and influence in the global digital asset market.

From losses to new opportunities brought by cryptocurrency

In recent years, influenced by factors such as global economic fluctuations, geopolitical issues, and the decline in the activity of the Hong Kong stock market, traditional brokerage and underwriting businesses of Hong Kong securities firms are generally facing growth pressure.

According to data from the Hong Kong Exchanges and Clearing Limited, about 37 brokerages ceased trading in 2024. Furthermore, data from the past three years shows that the number of Hong Kong brokerages has been decreasing year by year. The entry barrier for applying for a financial license in Hong Kong is relatively low, resulting in a large number of small and medium-sized brokerages in the market, where homogeneous competition is intense. In recent years, the performance of the Hong Kong stock market has been weak, further exacerbating the operational pressure on brokerages. Some small and medium-sized brokerages are experiencing poor operating conditions and facing significant survival pressure.

The "Hong Kong Digital Asset Development Policy Declaration 2.0" may provide new opportunities for brokerages. According to the Hong Kong Securities and Futures Commission's official website, as of June 26, a total of 41 institutions have completed the upgrade of License No. 1, which allows existing securities trading licenses to be upgraded to provide virtual asset trading services. The majority of these are brokerages, including Victory Securities, Tiger Brokers, Futu Securities, Tianfeng International under Tianfeng Securities, and Haifu Securities under Oriental Fortune.

Recently, 37 institutions have been approved to upgrade to License No. 4, which is for virtual asset investment advisory—providing professional advice on digital assets, including Zhongtai International Securities, Ping An Securities Hong Kong, and others; 40 asset management institutions have been approved to upgrade to License No. 9, which is for virtual asset management—managing funds where virtual assets account for more than 10%.

With the implementation of the "LEAP" framework and the deepening of brokerage practices, the Hong Kong market is expected to witness a wave of financial innovation led by brokerages, and the "GF Token" may just be the beginning. More types of tokenized bonds, funds, REITs, and even IPOs will emerge. Brokerages will also leverage their structured capabilities and distribution networks to become core issuers and market makers.

Looking ahead, brokerages may combine smart contracts to develop more complex structured income certificates, derivatives linked to the performance of digital assets, automated investment strategy products, and more. A seamless "fiat currency-stablecoin-cryptocurrency-traditional securities" exchange and trading experience will also be realized. Brokerages can provide leveraged services such as margin financing based on the digital assets held by clients as collateral, integrating comprehensive wealth management and asset allocation solutions for digital assets, and so on.

However, the arrival of "spring" is not achieved overnight. The declaration provides fertile ground and clear direction, but true harvest requires brokers to continuously delve into aspects such as technological innovation, compliance risk control, customer education, and product design. Challenges have always been present, and the competition is fierce enough. For brokers, in the arena of crypto assets, they face not only competition among brokers but also competition from compliant exchanges in the same industry.

For the cryptocurrency industry, the active involvement of brokerages undoubtedly builds a bridge between cryptocurrency and traditional finance, making the flow of funds between traditional financial products and virtual currencies much smoother.