In three years, what deep changes have been triggered in Hong Kong as it transitions from "Virtual Assets 1.0" to "Digital Assets 2.0"?

The "Policy Declaration 2.0" aims to transform Hong Kong into a global innovation hub for digital assets, further updating and refining existing policies and regulatory frameworks to adapt to the rapid development of the digital asset industry.

Written by: Crypto Salad

The "Hong Kong Digital Asset Development Policy Declaration 2.0" (hereinafter referred to as "Policy Declaration 2.0") is a policy document released by the Government of the Hong Kong Special Administrative Region on June 26, 2025, aimed at making Hong Kong a global innovation center in the digital asset field, further updating and improving the existing policies and regulatory framework to adapt to the rapid development of the digital asset industry.

The Financial Secretary, Paul Chan, stated that the "Policy Declaration 2.0" showcases the SAR government's vision for the development of digital assets and demonstrates the practical application of tokenization through practice, promoting diversification of application scenarios. By combining prudent regulation with encouragement of market innovation, a more vibrant digital asset ecosystem is being constructed that integrates with the real economy and social life, bringing benefits to the economy and society while reinforcing Hong Kong's leading position as an international financial center. With the release of the "Policy Declaration 2.0", it is believed that everyone will raise such questions:

• "2.0"? What is the "Policy Declaration 1.0"...
• What is the relationship between "Policy Declaration 2.0" and it...
• What is the main content of "Policy Declaration 2.0"...
• What is Hong Kong's attitude towards the development of digital assets...

The Crypto Salad team will interpret the important information in the "Policy Declaration 2.0" from multiple dimensions by combining the development of virtual assets and digital assets.

The above image is the "Hong Kong Digital Asset Development Policy Declaration 2.0"

1. Hong Kong Releases Digital Asset Declaration

First, before explaining the "Policy Declaration 2.0", the Crypto Salad team will help everyone review what was discussed in "Declaration 1.0"?

The so-called "Declaration 1.0" is formally titled: "Policy Declaration on the Development of Virtual Assets in Hong Kong" (hereinafter referred to as: "Policy Declaration 1.0"). "Policy Declaration 1.0" was issued in 2022, and it clarifies the policy stance and guidelines set by the Hong Kong SAR government for developing a vibrant virtual asset industry and ecosystem in Hong Kong, which includes: the vision and guidelines of the Hong Kong government, the regulatory framework for virtual assets, experimental programs such as green bonds and digital Hong Kong dollars launched by the Hong Kong government, and the outlook of the Hong Kong government on the future of virtual assets, etc. "Policy Declaration 2.0" is a further upgrade based on it, which includes: continuation of goals, deepening of regulation, expansion of key areas, broadening of scenarios, transformation of terms, and increased tax incentives, the differences between the two are shown in the table below:

The above table is a brief distinction between "Policy Declaration 1.0" and "Policy Declaration 2.0"

In recent years, the concept of digital assets has become increasingly clear, and with the explosive growth of all stocks related to digital concepts, the public's attitude towards stablecoins and virtual assets is no longer one of fear of discussing coins. With the release of the "Policy Declaration 2.0", it is evident that the concept of "digital assets" is about to replace the original concept of "virtual assets". More and more high-level leaders, professional investment institutions, native Crypto, and new players prefer to use the term "digital assets". Moreover, as shown in the table above, in the "Policy Declaration 2.0", the term "virtual assets" has also been changed to "digital assets". This also signifies that the development of digital assets will enter a brand new era.

The above figure shows the global RWA market size and trading volume (Source: RWA.xyz)

The release of the "Policy Declaration 2.0" is based on the "Policy Declaration 1.0" published in October 2022. Compared to "Policy Declaration 1.0", the release of "Policy Declaration 2.0" not only changes the concept of "virtual assets" to "digital assets", but also upgrades stablecoins from "tool-based currency" to "infrastructure currency", clarifying that the regulatory system for stablecoin issuers will be implemented starting from August 1, 2025, setting requirements for reserve asset management, making it more legally recognized and widely accepted.

In addition, this policy declaration regards the tokenization of real-world assets as a key direction for industry development, not only promoting the normalization of bond tokenization but also planning to include more revenue-generating assets in the tokenization scope, which will break the boundaries between the virtual economy and the real economy.

2. The Four Core Pillars of the LEAP Framework

In traditional businesses, a considerable portion of operations is regulated by corresponding laws, whereas in emerging sectors like RWA and digital assets, there is a lack of relevant laws and regulations to impose restrictions. The "Leap" framework proposed in the "Policy Declaration 2.0" addresses this issue, consisting of four core pillars: optimizing laws and regulations, expanding the variety of tokenized products, promoting application scenarios and cross-sector collaboration, and developing talent and partnerships. The following will provide a detailed introduction.

(1) Legal and regulatory streamlining

The Hong Kong government mentioned in a notice published on its official website: the government is establishing a unified and comprehensive regulatory framework for digital asset service providers, covering digital asset trading platforms, stablecoin issuers, digital asset trading service providers, and digital asset custody service providers. Among them, the Securities and Futures Commission (SFC) will act as the main regulatory authority for the licensing mechanism of future digital asset trading service providers and digital asset custody service providers. Meanwhile, the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) will lead a comprehensive review of legislation to promote the tokenization of real-world assets and financial instruments.

This review will comprehensively examine the various processes of tokenized bond issuance and trading, including but not limited to settlement, registration, and record-keeping requirements. In this key point, the respective responsibilities of the CSRC, Treasury Bureau, and Monetary Authority are primarily mentioned, laying the foundation for the governance of the digital asset industry.

The above image is the announcement regarding the release of the "Policy Declaration 2.0" published by the Hong Kong government on its official website.

(ii) Expanding the suite of tokenised products

Regarding this, the Hong Kong government mentioned: "The government will regularize the issuance of tokenized government bonds and provide incentives for the tokenization of real-world assets (including clarifying the stamp duty arrangements applicable to tokenized exchange-traded funds) to enhance liquidity and popularity. On this basis, the government welcomes relevant tokenized exchange-traded funds to be traded in the secondary market through licensed digital asset trading platforms or other platforms in the future. The government will also promote broader asset and financial instrument tokenization, demonstrating the diverse applications of this technology in different sectors, including precious metals (such as gold), non-ferrous metals, and renewable energy (such as solar panels)."

The "regularization of tokenized government bond issuance" means that everything is fully on-chain starting from the most basic financial products; and the "tokenization of real-world assets**" includes not only RWAs but also the tokenization of other financial instruments. Moreover, the "stamp duty exemption" and "encouragement of other platforms to engage in secondary trading" emphasized in the Policy Declaration 2.0 can promote the liquidity and popularity of digital assets, and the issue that most people previously criticized, which was that digital assets could not circulate in the secondary market, has also been resolved.**

(3) Advancing use cases and cross-sectoral collaboration

In promoting application scenarios and cross-sector cooperation, the Hong Kong government mentioned that the stablecoin issuance licensing mechanism will be implemented on August 1, which will help advance the development of substantive application scenarios. At the same time, the government is also committed to strengthening cooperation among regulatory bodies, law enforcement agencies, and technology providers to develop digital asset infrastructure. To express support and take a leading role, the government welcomes market participants to propose suggestions on how the government can experiment with and utilize licensed stablecoins. In addition, Cyberport will also launch a blockchain and digital asset pilot funding program, which supports startups and related institutions, covering various aspects such as incubation, accelerators, marketing, and artificial intelligence, providing funding for application projects with future application potential, significance, and market impact, thereby promoting the development of digital technology in Hong Kong, cultivating relevant talents and enterprises, attracting more talents, facilitating industrial upgrades, and creating a good digital technology ecosystem.

The most important point regarding this framework is the requirement for regulatory and law enforcement agencies to cooperate with technology providers, meaning they need to quickly learn the relevant technologies in order to handle related cases fairly and justly; meanwhile, market participants can also engage with institutional participants to provide valuable opinions on issues such as "How to obtain licenses?" and "How to conduct testing?".

(IV) Talent and Partnership Development

Regarding the last point, the government of the Hong Kong Special Administrative Region mentioned: the government is committed to collaborating with the industry and academia to promote talent development and position Hong Kong as an exceptional center for digital asset knowledge sharing and facilitating international cooperation, including joint research programs and global regulatory collaboration. The government will establish a sustainable talent pool by nurturing a new generation of entrepreneurs, researchers, and technical experts.

Currently, talents from the mainland and Singapore have been successively lost due to policy reasons, while Hong Kong has seized this opportunity, implementing a series of programs such as "High Talent" and "Excellent Talent" to make unremitting efforts to attract talent and become a hub for talent.

3. Key Interpretation of "Policy Declaration 2.0"

(1) Unified and comprehensive regulatory framework

Currently, in this section, the keywords we can identify include : digital asset exchange, stablecoin issuance, digital asset trading service providers, and digital asset custodians. These four entities are key participants in the digital asset ecosystem.

Among them, digital asset exchanges serve as the core platform for digital asset trading, providing users with services for buying, selling, exchanging, and trading derivatives of digital assets. They need to apply to the Securities Regulatory Commission for the "Type 1 (Securities Trading)" and "Type 7 (Providing Automated Trading Services)" licenses to ensure compliant operation.

Stablecoin issuance mainly refers to the issuance of stablecoins anchored to physical assets, aimed at reducing the price risk of digital assets, and is subject to the regulation of the "Stablecoin Regulations" that will come into effect on August 1, 2025.

A digital asset trading service provider refers to an entity that offers auxiliary services for users to trade digital assets, without directly operating an exchange, and it must comply with the Securities and Futures Ordinance.

The above image is excerpted from "Policy Declaration 2.0" under "Unified and Comprehensive Regulatory Framework"

(2) Review of Tokenization Laws and Regulations

In addition, this section clearly states that Hong Kong needs to formulate laws for tokenization and strengthen regulatory measures to harness the potential of financial technology and digital technology. Therefore, a legal and regulatory system is essential. The key areas that should be regulated and examined currently include, but are not limited to: tokenized bond issuance, trading processes, settlement, registration, and record-keeping requirements.

The Hong Kong Special Administrative Region Government has previously issued two tranches of tokenized green bonds totaling HKD 6.8 billion, and has clearly stated its intention to regularize the issuance of tokenized government bonds, including different denominations, currencies, and various term arrangements, thus catering to a broader range of investors. This move aligns with the "leveraging the potential of financial technology and digital technology" mentioned in the document.

The above image is an excerpt from the "Tokenization Legal and Regulatory Review" in the "Policy Declaration 2.0"

(3) Provides incentives for the tokenization of real-world assets and financial assets.

The third aspect is relatively important, as it mainly discusses the need to provide incentives for the tokenization of real-world assets and financial assets. The collaboration between the Monetary Authority and the Securities and Futures Commission has always been very close, and the progress of the regulatory sandbox has not been fast. It has been nearly a year since the launch of the Longxin project, and the slow progress is mainly due to the fact that the Monetary Authority must be responsible for promoting the construction of the digital Hong Kong dollar. Furthermore, the "Policy Declaration 2.0" also mentions the necessity to promote the settlement of interbank tokenized deposits, in other words, it aims to encourage the advancement of the digital Hong Kong dollar construction.

The London Metal Exchange (LME) has already included Hong Kong as a licensed delivery location within its global warehouse network. For the ecosystem of commodities, if tokenization and physical asset tracking technology are applied in warehousing plans, tokenization technology can become an identification label for global warehouses, which is a very important technology in supply chain finance, commodity trading, and international logistics settlement. In addition to gold and precious metals, other non-ferrous metals and renewable energy are also at the forefront of tokenization.

The "Stablecoin Regulation," which will be implemented on August 1, 2025, focuses on the management of reserve assets, stable mechanisms, redemption processes, and prudent risk management systems. This aligns with the content mentioned in "Policy Declaration 2.0."

The above image is an excerpt from "Policy Declaration 2.0" under "Providing incentives for the tokenization of real-world assets and financial assets"

(4) Hong Kong's first digital asset index

In addition, the "Policy Declaration 2.0" document also discusses the first batch of digital asset indices released by the Hong Kong Stock Exchange, which will increasingly become a reliable benchmark for Bitcoin and Ethereum prices in the Asia region, with the ultimate goal of consolidating Hong Kong's leading position as an international financial center.

(5) The Finance Bureau and the Securities Regulatory Commission provide consulting services.

The document also points out that, at present, the Financial Bureau and the Securities Regulatory Commission are still providing certain consultations regarding digital asset trading service providers and digital asset custody service providers, which will also make the operation of digital assets smoother.

4. Interpretation of Crypto Salad

The core goal of the "Policy Declaration 1.0" is to address the foundational issue of transitioning the Hong Kong market from "none" to "some". Therefore, its content mainly focuses on establishing the most basic framework regulations. As of now, with the gradual establishment and improvement of various law enforcement agencies, the market has formed a clear understanding of the methods and specific forms for achieving "some".

However, in the new stage of market development, merely having "a fundamental framework" is no longer sufficient to meet the demands. The pursuit of ecological prosperity has become the core direction. This requires the inclusion of nearly all participants under the premise of balancing various interests, not only traditional asset holders and investors but also players, speculators, and other opportunistic participants. Achieving this goal necessitates opening up more clear development opportunities, and the clarification of categories such as precious metals in the "Policy Declaration 2.0" reflects this thinking.

In addition, the "Policy Declaration 2.0" mentions relevant content such as "issuing licenses," "regulatory framework," and "consulting services," which not only publicly solicits opinions but also clearly states that there will be follow-up implementation. By standardizing the key processes of digital asset from issuance, circulation to exit, ensuring its safety and reliability, and implementing license management, it can provide participants with a stable operating environment, which is a significant improvement of the "Policy Declaration 2.0." At the same time, government officials, legislators, and other parties actively absorb and supplement public opinions, and this characteristic is also reflected in the precision of the "Policy Declaration 2.0" and more regulations.

As mentioned earlier, based on the "LEAP" framework, it is necessary to first advance compliance supervision, then expand categories, followed by cross-domain scenario extension, and finally implement measures to attract talent, among other tasks. These constitute the cornerstone of ecological prosperity, providing essential conditions such as "talent", "capital", and "clear objectives" for relevant entities to participate in the digital asset industry.

Crypto Salad believes that the "Policy Declaration 2.0" provides precise guidance for the management direction in this field. If it can be properly implemented, the Hong Kong digital asset ecosystem will basically take shape; if the practice is successful, the crypto financial market and capital will achieve a high degree of integration.