The Hong Kong Special Administrative Region government released last month its Policy Statement 2.0 on the Development of Digital Assets in Hong Kong, outlining the next phase of its digital finance strategy. Building on the original 2022 framework, the new document offers a more structured plan for positioning the city as a credible and forward-looking hub for digital assets.

The update arrives at a time when much of the global digital asset industry remains in flux. Some jurisdictions are taking a wait-and-see approach. Others have moved aggressively, only to scale back after volatility or regulatory uncertainty. Hong Kong is now trying to strike a balance: to offer regulatory clarity while leaving enough room for innovation. It’s a cautious but deliberate move — and one that reflects both lessons learned and a longer-term view.

At the heart of Policy Statement 2.0 is a four-part framework known as LEAP — legal, expand, advance, people. Each pillar touches on a key area the government believes is essential for building a sustainable digital asset ecosystem.

The first pillar, legal, focuses on improving regulatory consistency. This includes proposals to create a unified licensing regime covering trading platforms, stablecoin issuers, custodians, and other service providers. The Securities and Futures Commission will take the lead on this front, and public consultation is now underway.

The government’s approach here is cautious but clear. Hong Kong is trying to offer reassurance to both institutional investors and emerging startups by defining the rules of the game early. The idea is not to rush innovation but to provide a safe, transparent environment in which it can take place.

The second focus, expand, reflects a growing interest in the tokenization of traditional financial instruments and real-world assets (RWAs). This isn’t entirely new — Hong Kong has already issued tokenized green bonds — but the government now wants to build on this experience and move toward tokenizing a wider range of assets, including commodities, energy, and even renminbi-linked financial products.

More broadly, the hope is to position tokenization not as a niche technology but as an extension of mainstream finance. Done correctly, it could lower costs, increase transparency, and create new forms of liquidity — particularly in areas like trade finance or cross-border corporate lending, where efficiency gains are often limited by legacy systems.

This is also where digital asset policy intersects with Hong Kong’s broader role in the Guangdong-Hong Kong-Macao Greater Bay Area. By encouraging renminbi-related tokenized products, the city may deepen financial connectivity with Chinese mainland firms, particularly those in manufacturing or logistics, while retaining its own regulatory independence.

The third pillar, advance, speaks to the need to move beyond concepts and white papers. A recurring criticism of digital asset initiatives — globally and locally — is that they often fail to move past the pilot stage. Here, the government is aiming to change that by supporting real-world use cases and cross-sector collaboration.

Cyberport, one of Hong Kong’s major tech incubators, will play a central role. A newly announced pilot subsidy plan will provide up to HK$500,000 ($63,700) per project, covering up to 80 percent of approved costs. Eligible projects must demonstrate strong commercial potential and must partner with established institutions — an effort to ground innovation in practical outcomes.

The scope is deliberately wide. Areas eligible for support include tokenized RWAs, stablecoin-based payment solutions, decentralized identity systems, and artificial-intelligence-integrated blockchain applications. The focus is not just on innovation for its own sake, but on practical tools that can serve business and society more broadly.

Hong Kong’s approach stands out for its structure and restraint. If it succeeds, it could offer a model for other international financial centers looking to make sense of the digital asset economy—without losing sight of financial stability or market integrity

The final pillar, people, emphasizes the role of talent and international collaboration. The government plans to strengthen ties between universities and industry, while also pursuing memorandums of understanding with overseas regulators. The goal is to ensure that Hong Kong remains aligned with global standards, even as it pursues its own priorities.

This is a relatively understated part of the policy, but an important one. Regulations and incentives matter, but the long-term health of the ecosystem will depend on whether there’s a deep and resilient pool of professionals — engineers, compliance experts, entrepreneurs — who choose to build their careers in Hong Kong.

The city also hopes to draw in global firms by offering clearer regulatory pathways, especially for those who see Asia as their next growth market but are wary of unpredictable or fragmented environments elsewhere.

Taken as a whole, the Policy Statement 2.0 does not radically alter Hong Kong’s direction, but it does sharpen its strategy. There is now a more detailed road map, stronger institutional support, and a clearer sense of how digital assets might fit into the broader economy.

It is also worth noting what the government isn’t doing. There’s no rush to launch a retail central bank digital currency, no attempt to directly compete with crypto havens offering minimal oversight. Instead, Hong Kong seems to be pursuing a middle path — focused on compliance, institutional trust, and real-world applications.

That said, challenges remain. The global digital asset market is still volatile, and investor confidence remains fragile. The success of the new strategy will depend not only on the strength of its legal framework but also on execution: whether the pilot programs deliver, whether tokenized products gain real adoption, and whether startups see Hong Kong as a viable base from which to scale.

But in a sector too often defined by hype or regulatory overreach, Hong Kong’s approach stands out for its structure and restraint. If it succeeds, it could offer a model for other international financial centers looking to make sense of the digital asset economy — without losing sight of financial stability or market integrity.

And if it doesn’t, it won’t be for lack of trying. This time, at least, the ambition is matched by a plan.

The author is chairman of the Asia MarTech Society and sits on the advisory boards of several professional organizations, including two universities.

The views do not necessarily reflect those of China Daily.