Two major financial regulators in Hong Kong have jointly announced their intention to implement reporting requirements established by the European Securities and Markets Authority (ESMA) for crypto over-the-counter (OTC) derivatives.
On September 26, the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) revealed a plan to align their OTC reporting standards with global benchmarks following a review of feedback from a consultation paper released in March 2024.
Stakeholders and investors in Hong Kong noted that crypto OTC derivatives investments do not fit neatly into the traditional five asset classes: interest rates, foreign exchange, credit, commodities, and equities.
The HKMA and SFC highlighted that ESMA implemented the Digital Token Identifier (DTI) in reporting back in October 2023, which now serves as a key reference for crypto asset service providers across Europe.
Emphasising the necessity of a Unique Product Identifier (UPI) for transaction reporting, the Hong Kong regulators announced their intention to adopt this mandate in their jurisdiction soon. They stated,
“As the Digital Token Identifier has been included in the data field ‘Underlier ID (OTHER)’ as an allowable value in the upcoming consultation of version 4 of the CDE Technical Guidance, we will integrate the use of DTI into our reporting requirements.”
The authorities will also keep a close watch on the outcomes of mandates established by other jurisdictions and will adopt a similar regulatory framework as needed.
Meanwhile, Hong Kong has reached a significant milestone by unveiling plans to collaborate with industry stakeholders on asset tokenization. HKMA and the central bank announced the formation of the “Project Ensemble Architecture Community,” which will include industry representatives and regulators.
The primary goal of this initiative is to establish standards and oversee the development of tokenization projects in Hong Kong. Additionally, the community will work to promote interoperability among wholesale central bank digital currencies (wCBDCs), focusing on creating a mechanism for seamless interbank settlement of tokenized deposits for asset transactions.
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