Hong Kong update: Recent and future milestones

Recent milestone

Hong Kong has recently seen the launch of its first tokenized fund which is a significant milestone for the asset management sector. On February 28, 2025, China Asset Management (Hong Kong) Limited issued an announcement confirming the launch of its first tokenized fund, the ChinaAMC HKD Digital Money Market Fund (the Fund). The Fund aims to invest mainly in HKD-denominated short-term deposits and high-quality money market instruments. The product is available through eligible distributors and marks a significant milestone as the first retail tokenized fund in the APAC region.

Background

Money market funds (MMFs) are a type of mutual fund that invests in short-term, high-quality debt instruments like government securities and commercial paper. They are designed to be a relatively low-risk, liquid investment option for retail investors who need to park their money while earning a slightly higher return than a traditional savings account. In simple terms, tokenization refers to the creation of blockchain-based tokens that represent or aim to represent ownership in certain assets/rights. These assets/rights are resources economically owned by an individual or an institution and in theory, tokens can represent any types of assets – be it financial assets (bond, stocks, funds or securities) and non-financial assets (such as real estate or art). Blockchain is a programmable ledger built on distributed ledger technology and the tokens themselves are digital representations of the assets on the blockchain. The "retail" element in a retail tokenized fund refers to the accessibility and design of the fund for individual, non-professional investors. 

There are a couple of documents that are essential reading when it comes to tokenized retail funds in Hong Kong. The SFC Circular on tokenization, which was issued in November 2023, sets out the requirements for tokenizing investment products authorized by the SFC under Part IV of the Securities and Futures Ordinance. It covers the creation of blockchain-based tokens representing ownership in investment products, primary dealing, and secondary trading of these tokenized products. The Hong Kong Monetary Authority (HKMA) issued two documents on February 20, 2024 – the Circular on Tokenised Products and  Guidance on Digital Asset Custody Services. Together, these documents set out the supervisory standards expected of authorized institutions in Hong Kong when engaging in custody and dealing activities in relation to digital assets.  A summary of the key takeaways from these documents can be found here and here.

The SFC circular focuses on the regulatory framework for the tokenization process and the requirements for product providers, while the HKMA documents provide the supervisory and operational standards for institutions handling these tokenized products. Together, they create a regulatory environment for the issuance, distribution and custody of tokenized investment products in Hong Kong.

Defining trends

The Fund is another example of Hong Kong becoming APAC’s digital hub and may lead to other asset managers tokenizing their products. Tian Gan, CEO of ChinaAMC (HK), noted that tokenization was the cornerstone of their Web 3.0 strategy, which included plans for tokenized real estate and private equity funds. Financial Services Secretary Christopher Hui has also called tokenization one of the “defining trends” that could reshape traditional finance and push Hong Kong further into Web 3.

Key message

So, a key message following the launch of the Fund is that more is expected to follow. But this applies not only to commercial developments as mentioned above, but regulatory ones too in the wider crypto asset space.  

For example, a week before the Fund was launched, another milestone was reached with the SFC rolling out a new regulatory roadmap setting out its core guiding principles to continue Hong Kong’s development as a digital assets hub. The roadmap adopted the “ASPIRe” slogan representing its five pillars: Access, Safeguards, Products, Infrastructure and Relationships. In terms of access, the SFC plans to introduce a licensing framework for virtual asset OTC trading, which will provide for parity in regulatory treatment between virtual asset trading platform operators (VATPs) and OTC dealers. Additionally, the SFC will also introduce a licensing regime for virtual asset custodians, which will mirror requirements applied to traditional custodians such as capital adequacy, cybersecurity and segregation of assets. While no timeline has been provided for the virtual asset OTC trading regime, the SFC has indicated that it aims to complete preparing legislation for the virtual asset custody regime by end-2025. Further information on the roadmap can be found here.

Future milestone

And finally, there is also the Hong Kong Stablecoins Bill which the Hong Kong Government gazetted on December 6, 2024, which provides for the licensing and supervision of stablecoin activities. When the Bill completes the legislative process, it will be another significant milestone for Hong Kong. Having received its first reading in Legco in December 2024, the Stablecoins Bill is expected to receive its second reading on May 21, 2025. Further information on the Bill can be found here.