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Hong Kong is preparing to introduce new reporting requirements for over-the-counter (OTC) crypto derivatives, aligning their standards with the European Securities and Markets Authority (ESMA).
The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) jointly announced on September 26 their intention to adopt the European framework after reviewing feedback from a consultation paper released in March 2024.
Current OTC Regulations in Hong Kong
Currently, Hong Kong’s regulatory framework does not classify crypto OTC derivatives under traditional asset classes like interest rates, foreign exchange, or equities. To address this, industry stakeholders have proposed using Digital Token Identifiers (DTI) to clearly identify crypto-asset underliers.
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DTIs have already been implemented in Europe, serving as a core reference for crypto-asset service providers. By incorporating DTI, Hong Kong aims to keep up with global standards and competition in the crypto derivatives space.
The regulators acknowledged the importance of Unique Product Identifiers (UPI) in transaction reporting. This aligns with their goal to streamline crypto-asset reporting within the OTC derivatives market. In response to industry feedback, the HKMA and SFC have committed to allowing the use of DTI in the forthcoming version of their reporting requirements.
A Cautious Approach
However, Hong Kong regulators are taking a cautious approach by continuing to observe mandates from other jurisdictions. They indicated their openness to adopting additional reporting standards, should global trends necessitate further alignment.
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The new reporting framework is expected to be in place by September 29, 2025. By that time, Hong Kong will have fully integrated the updated requirements into its financial reporting regime.
Other Avenues
In recent months, Hong Kong has demonstrated its commitment to innovation within the blockchain and digital assets space. Earlier this year, the region approved the launch of spot Bitcoin and Ether ETFs, adding to its crypto-related offerings.
Hong Kong is also advancing its central bank digital currency (CBDC) initiative, the e-HKD, marking a milestone with the second phase of its pilot program, Project e-HKD+, launched on September 23.
Project e-HKD+ will explore the use of tokenized assets, programmable payments, and offline transactions. Expected to last about a year, the project will operate within a regulatory sandbox to ensure thorough testing and development of the digital currency.
