The Hong Kong Monetary Authority (HKMA) has issued letters to the heads of authorized institutions (AIs) regarding the tokenization and custody of digital assets. In one letter, the HKMA outlined standards for the provision of customer asset custody, based on international standards and practices. These standards apply regardless of whether the AIs acquire assets through standalone services or other activities.
The annex to the letter presents standards in eight categories, covering topics such as governance and risk management, asset segregation, outsourcing, disclosure, and Anti-Money Laundering and Counter-Financing of Terrorism.
The second letter focuses on the sale and distribution of tokenized products that are not regulated under the Securities and Futures Ordinance or subject to the requirements of the Securities and Futures Commission. It explicitly excludes stablecoins, which will be subject to licensing as per a consultation paper released by the HKMA and other regulators in December. The Feb. 20 letter highlights that the structure of tokenization can impact the nature of the asset, emphasizing the need for due diligence, disclosure, risk management, and custodial services.
The letter concludes by expressing the HKMA’s support for AIs’ initiatives on tokenization and acknowledging the progress made by the industry so far.
In other news, Hong Kong crypto stocks have experienced a surge, and OKX has announced plans to invest in L1s, according to Asia Express magazine.