Hong Kong’s new digital finance layout: first AI policy statement issued, and plans to extend virtual asset tax incentives

Original title: "Hong Kong Government Promotes Financial Innovation: The First AI Policy Guidelines for the Financial Industry Released, Extending Virtual Asset Tax Incentives"

Original author: James, BlockTempo

The Financial Services and the Treasury Bureau (FSTB) of Hong Kong today issued a "Policy Statement on the Responsible Application of Artificial Intelligence (AI) in Financial Markets", which covers several key points, including the adoption of a dual-track approach to promote the adoption and development of AI in the financial services industry while addressing potential challenges.

The statement states that the application of AI in the financial market has three major characteristics, including data orientation, double-sided effects and vitality, and reiterates that while adopting and developing AI, it is necessary to address potential challenges such as cybersecurity, data privacy and intellectual property protection.

Dual-track approach promotes the development of AI in financial institutions

The FSTB believes that financial institutions should formulate AI governance strategies to provide direction for how to implement and use AI systems. A risk-based approach should be adopted in the procurement, use and management of AI systems, and human supervision is essential to mitigate potential risks.

The Hong Kong University of Science and Technology will open its AI models and computing resources to the Hong Kong financial services industry, providing consulting and training services to financial institutions when deploying internal systems or developing applications and network interfaces.

The Hong Kong Treasury Bureau mentioned that for regulated financial institutions, the potential risks brought by AI have been appropriately reflected in the relevant regulations or guidelines issued by financial regulators. In order to keep up with the latest developments in AI and international practices, including the emergence of explainable AI, financial regulators will continue to review and update the existing relevant regulations or guidelines.

In addition, the Hong Kong Police Force has been exchanging intelligence with international organizations, law enforcement agencies in other jurisdictions, and the AI industry to address the challenges posed by AI to cyber policing. In terms of public education, the Investor and Financial Education Committee will enhance public awareness and understanding of the opportunities and risks brought by AI technology to retail investment and financial management.

Currently, although the AI craze has swept the world, due to geopolitical factors, Hong Kong has become one of the few regions in the world that has been excluded and banned from using OpenAI's ChatGPT and Google's Gemini.

Hong Kong Government Releases New Regulatory Roadmap for Virtual Assets

At the same time, the Hong Kong government also announced a new policy on virtual assets. Hong Kong Treasury Secretary Paul Chan proposed today at the 2024 Hong Kong Fintech Week to extend the virtual asset tax incentive plan, saying that the relevant tax incentive bill will be submitted to the Legislative Council before the end of the year.

Yip Chi-hang, executive director of the Intermediary Department of the Hong Kong Securities and Futures Commission, delivered a keynote speech at the 2024 Hong Kong Fintech Week today, outlining the regulatory roadmap for Hong Kong's virtual asset market.

Yip Chi-hang said that the Hong Kong Virtual Asset Trading Platform (VATP) is progressing smoothly. Three licenses have been granted and another 14 applications are being processed. The Hong Kong Securities and Futures Commission is taking a relatively fast approach to review and approve 11 applications that are "deemed to be licensed", and hopes to grant several more licenses before the end of the year.

In order to support licensed virtual asset trading platforms in developing sustainable business models, the Hong Kong Securities and Futures Commission is establishing a formal advisory group for all licensed virtual asset trading platforms, composed of representatives from each licensed institution, to ensure that the Securities and Futures Commission considers their views in the policy-making process.

The Hong Kong Securities and Futures Commission expects that the advisory group will be launched in early 2025. The SFC will publish a white paper on the priority regulatory issues of the virtual asset industry in the future, which will be based on the group's future discussions and feedback from other stakeholders.

HKEX to launch virtual asset index series

HKEX announced today that it will launch the HKEX Virtual Asset Index Series on November 15, 2024 to provide a reliable benchmark price for virtual assets and support Hong Kong's development into Asia's leading digital asset center. The index series will provide a transparent and reliable benchmark for the pricing of Bitcoin and Ethereum in the Asian time zone, and is committed to providing a unified reference price for virtual assets to resolve the price differences between global exchanges for such assets.

The reference index is based on the benchmark spot price weighted by the 24-hour trading volume of Bitcoin or Ethereum, and is calculated based on the aggregated market prices of several major virtual asset exchanges and is denominated in US dollars in real time. The reference exchange rate is designed for the settlement of financial products and is calculated at 4:00 pm Hong Kong time every day.

The index series will be the first virtual asset index series developed in Hong Kong that complies with the EU Benchmark Regulation (BMR), and will be jointly managed and calculated by a benchmark management agency registered in the UK and virtual asset data and index provider CCData.

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