The Hong Kong Monetary Authority (HKMA) recently 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 asset custody, taking into account international standards and practices. These standards apply whether the AIs acquire the assets through standalone services or other activities.
The letter’s annex contains standards across eight categories, which consist mainly of general statements. For example, it states that senior management and staff involved in custodial activities should possess the necessary knowledge and expertise.
The topics covered in the standards include 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. However, it does not apply to stablecoins, as they will be subject to licensing based on a consultation paper released by the HKMA and other regulators in December. The Feb. 20 letter emphasizes that the nature of the asset may be influenced by the tokenization structure, and therefore, due diligence, disclosure, risk management, and custodial services are discussed in detail.
The letter expresses the HKMA’s support for AIs’ initiatives in tokenization and acknowledges the progress made by the industry so far.
In other news, Hong Kong’s crypto stocks have experienced a surge, and OKX plans to invest in L1s, as reported by Asia Express magazine.