The HKMA originally released a consultation paper on 7 February, 2024 (the “Consultation Paper”), which detailed the HKMA’s proposed approach to incorporate the latest standards on prudential treatment of cryptoasset exposure published by the Basel Committee on Banking Supervision in December 2022 into Hong Kong’s legal framework. This will include amendments to various existing rules and regulations covering capital adequacy, liquidity management, disclosure requirements and exposure limits, including the Banking (Capital) Rules and the Banking (Disclosure) Rules (collectively, the “Rules”). Where appropriate, supplementary guidance such as FAQs or supervisory policy manual modules will be issued as guidance for the operation of the amended rules.
The proposed amendments will establish four categories of cryptoassets: Groups 1a, 1b, 2a, and 2b. AIs must assess whether relevant cryptoassets meet all or none of the classification conditions outlined in the amended Rules to determine their appropriate category and the corresponding prudential treatment.
Group 1 cryptoassets generally encompass cryptoassets that satisfy all classification conditions and will include tokenised traditional assets and cryptoassets with effective stabilisation mechanisms. Group 2 cryptoassets will be those cryptoassets that do not meet any classification conditions, and as a result, will face stricter requirements concerning capital, exposure limits, and governance standards.
The HKMA initiated a month-long soft consultation on proposed amendments to the Rules on 13 January 2025, inviting comments by 20 February 2025. This followed industry comments on the Consultation Paper in May 2024. It is anticipated that the revised Rules will be finalised and submitted to the Legislative Council for vetting in the second quarter of 2025, with the aim of implementing the new Rules by 1 January 2026, aligning with the Basel timeline for local implementation.
The full Consultation Paper can be accessed here. The letter issued in relation to the soft consultation and proposed amendments to the Rules (as annexed to the letter) can be accessed here and here.
