HONG KONG SAR, CHINA Law and Practice Contributed by: Pang Lee, Joyce Wang, Mark Liang and Francis Li, Cooley
Cooley 35th Floor Two Exchange Square 8 Connaught Place Central Hong Kong
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1. Overview of Blockchain and Crypto- Assets 1.1 Blockchain 1.1.1 Evolution of Uses of Blockchain Over the past 12 months, the blockchain ecosys- tem in the Hong Kong Special Administrative Region (HKSAR) has seen significant structural progress. The jurisdiction has progressively transitioned from an environment predominantly oriented towards retail cryptocurrency trading into an increasingly regulated, institutional-grade infrastructure hub. This evolution is characterised primarily by the market-pioneering tokenisation of real-world assets (RWAs), including traditional financial instruments, alongside the deep integration of distributed ledger technology (DLT) into interbank and capital market frameworks. Market practices have developed from isolated, piecemeal pilot projects into comprehensive, commercially viable deployments backed by definitive statutory frame- works. The current use cases most commonly being explored and implemented centre on institutional financial appli- cations. As highlighted in the March 2025 research paper of the Hong Kong Monetary Authority (HKMA), “Distributed Ledger Technology in the Financial Sec- tor: A Study on the Opportunities and Challenges”, programmability and transparency are the primary drivers for DLT adoption among local institutions. Financial institutions are actively tokenising traditional products, including money market funds, green bonds and commercial real estate.
By creating digital representations of these assets that are tradable on-chain, market participants achieve increased settlement efficiency, fractional liquidity and reduced counterparty risk. The HKMA study specifically notes practical applications such as experimental tokenised deposit solutions for 24/7 fund transfers and deep-tier supply chain financing via stablecoin-based conditional payments. Further- more, permissioned DLT networks are increasingly being deployed outside pure finance, specifically in supply chain logistics to enhance traceability, and in the green energy sector to track the real-time opera- tional performance of infrastructure, such as electric vehicle charging stations. Over the next 12 months, several critical legislative and regulatory issues are poised to impact the use of blockchain. The most significant is the sweeping expansion of the regulatory perimeter under the Anti- Money Laundering and Counter-Terrorist Financing Ordinance (Chapter 615) (AMLO). Following the pub- lication of the Consultation Conclusions on Legislative Proposal to Regulate Dealing in Virtual Assets and Further Public Consultation on Legislative Proposal to Regulate Virtual Asset Advisory Service Providers and Virtual Asset Management Service Providers and the Consultation Conclusions on Legislative Proposal to Regulate Virtual Asset Custodian Services on 24 December 2025, comprehensive draft legislation is being introduced to the Legislative Council in 2026. This legislation will establish formal, mandatory licens- ing regimes for over-the-counter (OTC) virtual asset (VA) dealing, custody, advisory services and portfo- lio management, effectively bringing the entire digital
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