In a recent interview with Hong Kong Wen Wei Po, Hong Kong Legislative Council member and chairman of the Subcommittee on Web3 Virtual Asset Development, Wu Kit-chong, suggested that Hong Kong should make good use of the advantages of "one country, two systems" and "take the lead in the first trial" to include Bitcoin in the assets of the Exchange Fund.
01 The United States actively promotes strategic reserves
Bitcoin Bitcoin has seen a big bull market in recent months, with the price exceeding $100,000 at one point, and the biggest impetus for this is the support of future US President Donald Trump, who claims to include Bitcoin in the national strategic reserve after taking office. Wu Jiezhuang said, "Some states in the United States have also legislated to require 10% of state reserves to be bitcoin, so as to diversify asset allocation."
U.S. Rep. Giovanni Capriglioni of Texas introduced a bill in December 2024 calling on the state to build a Bitcoin reserve. "The Strategic Bitcoin Reserve is consistent with Texas' commitment to fostering digital asset innovation and providing Texans with enhanced financial security," the bill reads. The draft states that Texas must hold bitcoin for at least five years and that it must be kept in cold storage (some kind of device that is not connected to the internet) and that these assets cannot be used for transactions outside of Texas.
The Pennsylvania House of Representatives introduced a bill in November 2024 calling for the creation of a strategic Bitcoin reserve. According to the proposal, Pennsylvania's Treasury Secretary would be able to buy bitcoin with "up to 10%" of the state general fund, the "Rainy Day Fund" (fiscal stabilization fund) and the state investment fund. Assuming a 10% of the state's general fund is drawn, it means that the Pennsylvania Treasury can buy nearly $1 billion worth of Bitcoin.
Ohio Rep. Drake Merlin introduced a bill on December 17, 2024, to establish a strategic Bitcoin reserve in the state. The bill also gives the Ohio Secretary of the Treasury the discretion to purchase the asset.
The author believes that if Trump vigorously promotes the inclusion of bitcoin in the government's strategic reserve assets, it is believed that it will have a significant impact on the global market, especially the reserve assets, and governments cannot turn a blind eye.
Hong Kong reported: asked if the United States will be a strategic reserve asset, what impact will it have on the financial security of the mainland and Hong Kong, Wu Jiezhuang believes that the most likely is to shake the value of traditional assets, there is a supply ceiling of bitcoin will become an artifact against currency abuse, inflation, some countries believe that bitcoin can be more able to maintain value, "if the economic power takes the initiative to include bitcoin into the strategic reserve, the value of bitcoin will be more stable, will cause more and more other countries to follow suit, and reduce the holding of traditional assets, A decline in the price of traditional assets will shrink the government's fiscal reserves holding traditional assets. ”
02 Suggest that Hong Kong include cryptocurrencies in its fiscal reserves
As such, Mr Ng raised a number of concerns to the HKSAR Government, including whether the Government would consider including digital assets and cryptocurrencies in its fiscal reserves, and consider using the Exchange Fund to continue to purchase and hold them for a long time; and assessing the impact of foreign designation of bitcoin as a strategic reserve asset on the financial security of the Mainland and Hong Kong; At the same time, how to make use of Hong Kong's first-mover advantage and unique resources in the field of cryptocurrency, and make strategic arrangements to contribute to maintaining the country's financial security.
However, Wu Jiezhuang also pointed out that the risks of Bitcoin are not low, first, the price will rise and fall sharply, and second, we only know how many wallets there are in the market, but we do not know the identity of the holders who control these assets behind it. After balancing risk and reward, he believes that governments and businesses should allocate only a small portion of bitcoin as a financial asset.
03 The foundation of Hong Kong
Since the end of October 2022, Hong Kong issued a policy statement on the development of virtual assets, and the regulations, regulations, technologies and products related to virtual assets have become more and more abundant. At present, the number of licensed virtual asset platforms in Hong Kong has increased to seven, a total of 12 ETFs linked to Bitcoin and Ether are traded on the Hong Kong Stock Exchange, the first three companies (and company portfolios) are participating in the stablecoin "sandbox", and a number of tokenized bonds have been successfully issued in Hong Kong.
In terms of the speed of licensing, Hong Kong is relatively slower than Singapore, which is also committed to developing the virtual asset market. In 2024, Singapore issued 13 cryptocurrency licenses.
In the China Financial Stability Report 2024 released on December 26, 2024, the PBOC elaborated on the regulation of cryptocurrencies in Hong Kong as follows:
Hong Kong, China, is actively exploring the management of cryptoasset licenses. Hong Kong, China divides virtual assets into two categories for regulation, namely securitized financial assets and non-securitized financial assets, and implements a characteristic "dual license" system for virtual asset trading platform operators, i.e., "security tokens" are subject to the supervision and licensing regime of the Securities and Futures Ordinance, and "non-security tokens" are subject to the regulatory and licensing regime of the AMLO, and institutions engaged in virtual asset business are required to apply for registration licenses from the relevant regulatory authorities before they can operate. At the same time, large financial institutions such as HSBC and Standard Chartered Bank are required to include crypto-asset exchanges in the scope of daily customer supervision.
As the only offshore international financial center city in China, Hong Kong is a special presence in China's financial industry, and can be a pioneer in China's financial industry through its own positioning advantages. The world's major financial regulators are strengthening supervision, which just shows that crypto assets will no longer be niche assets, and compliance itself will also bring more traditional capital willing to enter the new market of crypto assets and build this market. Hong Kong innovatively includes a dual license system for securitized financial assets and non-securitized financial assets, namely the "Securities and Futures Ordinance" license, which regulates securitized crypto assets in accordance with the Securities and Futures Ordinance to ensure that they comply with the legal norms of securities trading. The AMLO license covers all virtual asset businesses to comply with anti-money laundering requirements and conduct strict KYC on customer identity.
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