Author: Chan Mo-po Source: Hong Kong Special Administrative Region Official Website
Since the beginning of this year, the external environment has continued to be uncertain, and various emergencies have become more frequent, but the atmosphere of Hong Kong stocks has steadily improved. Continuing the upward trend of last year, the Hang Seng Index has risen by more than 3,800 points this year, an increase of about 20%, and has been among the best in the world's major indices. At the same time, as of May this year, the average daily trading volume of the stock market has increased by about 1.2 times year-on-year to 242 billion yuan; the amount of new stock fundraising this year has also been close to 79 billion yuan, ranking among the top in the world, and the stock market refinancing has also exceeded 150 billion yuan. It can be said that the depth and breadth of the Hong Kong stock market have been significantly improved. It is worth noting that many cornerstone investors of large new stock fundraising come from Europe, the United States, the Middle East, and other parts of Asia, and the trend of increasing funds from these regions in Hong Kong stocks has become more and more obvious. In addition, bank deposits continue to increase and the interbank rate is low. The flow of funds confirms that international investors' confidence in Hong Kong's financial market is further increasing.
Hong Kong's asset and wealth management business has also seen steady growth. As of the end of March this year, the number of registered funds in Hong Kong reached 976, with a net inflow of more than US$44 billion year-on-year, an increase of 285%. It is believed that in two or three years, Hong Kong will become the world's largest cross-border asset management center. As the financial market continues to flourish, the number of people joining the financial industry is also on the rise. Since the beginning of this year, the number of individuals and institutions applying for licenses under the Securities and Futures Ordinance has recorded a double-digit increase compared with the same period last year.
In addition to traditional areas such as stocks and asset management, Hong Kong has also made great progress in digital finance, green finance and offshore RMB markets. Product innovation is an effective way to create market demand, increase market flow and accelerate the evolution of the industry. Since we issued our first policy statement on the development of the digital asset market at the end of 2022, the development of the relevant market in Hong Kong has accelerated significantly, and many related companies have settled and expanded in Hong Kong. So far, 10 virtual asset trading platforms have been licensed, and the SFC is processing the license applications of another 8. We are also promoting regulatory arrangements for custody and over-the-counter transactions.
The development of digital assets has also boosted the business of financial institutions. For example, the total transaction volume of digital assets and related products of local banks reached HK$17.2 billion last year; at the end of last year, the total amount of digital assets in custody of banks reached HK$5.1 billion.
In response to the latest developments and changes in the situation, we are about to issue the second policy statement on the development of digital assets, expounding on the next policy vision and direction. A series of specific measures include better combining the advantages of traditional financial services with technological innovation in the field of digital assets, improving the security and flexibility of digital assets in real economic activities, and encouraging local and international companies to explore the innovation and application of digital asset technology.
As for the Stablecoin Ordinance we proposed earlier, it has been passed by the Legislative Council to establish a licensing system for issuers of fiat stablecoins and will take effect on August 1, becoming one of the focuses of the market's recent attention. According to estimates, the total market value of stablecoins worldwide is about US$240 billion, and the global stablecoin trading volume last year exceeded US$20 trillion. With the booming development of the digital asset market, the market demand for stablecoins is expected to increase further.
Stablecoins are digital assets that are "anchored" to legal tender or linked to specific assets and have price stability. Among them, fiat stablecoins, with the security and efficiency of blockchain technology and the stability of legal tender, will become a potential tool to combine the financial system and the real economy to reduce costs and improve efficiency. In fact, stablecoins can be used as a medium of exchange without being restricted by traditional payment time and location; they can also develop diversified innovative solutions with their programmable characteristics to automate and intelligentize financial service processes. We have noticed that many market participants are very interested in this. After the Ordinance comes into effect, the HKMA will process the license applications received as soon as possible so that qualified applicants can carry out their business and bring new opportunities to Hong Kong's real economy and financial services.
Hong Kong's steady and prudent promotion of stablecoin development provides a new paradigm for the global stablecoin market, and also reflects our functions as a "firewall" and "experimental field" under the "one country, two systems" policy, providing experience and reference for the country's financial development. For example, we have adopted a more open model, allowing licensed issuers to choose different fiat currencies as the anchor fiat currencies for issuing stablecoins, which will help attract more institutions from different parts of the world to issue stablecoins in Hong Kong according to actual application scenarios, which will greatly improve the liquidity of related activities and the competitiveness of the Hong Kong market.
In addition, in addition to complying with a series of risk management, anti-money laundering and other requirements, issuers must also put forward specific business rationales, such as application scenarios, to explain how their stablecoin business can practically solve the pain points in economic activities, closely follow financial innovation to serve the real economy, and promote the sustainable development of the industry.
In this era of challenges and opportunities, we must seize opportunities and continuously enhance Hong Kong's competitiveness and improve Hong Kong's business environment in all aspects. With the joint efforts of the SAR government and all sectors of society, Hong Kong has performed well in many international rankings in the past year, including international competitiveness, economic freedom and financial center status. International rating agencies have also given Hong Kong positive ratings. Surveys of many foreign chambers of commerce in Hong Kong also show that foreign capital continues to be optimistic about Hong Kong's development prospects, reflecting that Hong Kong has received objective and universal recognition. We must continue to work hard and tell the Hong Kong story and the Chinese story well both internally and externally. We will surely win wider recognition. I believe that these similar positive comments will continue to come.
(The author is the Financial Secretary of the Hong Kong Special Administrative Region)
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