Hong Kong is moving towards global standardization to position itself as a leader in crypto derivatives regulation.
The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) have submitted a consultation paper proposing significant improvements to the reporting regime for over-the-counter (OTC) derivatives in the city.
In a document In a recent report on this public consultation, the authorities highlighted that this effort seeks to align Hong Kong's regulation with international standards, specifically those established by the European Union and other major jurisdictions in the sector.
In an effort to adopt European standards, Hong Kong's financial authorities have proposed to make the use of Unique Transaction Identifiers (UTI), Unique Product Identifiers (UPI) and the submission of Critical Data Elements (CDE) mandatory when reporting crypto derivatives.
According to the agencies, these changes are not only intended to improve transparency and efficiency in reporting, but also to facilitate the harmonization of reported data internationally. The HKMA and SFC have noted that the use of the Digital Token Identifier (DTI) will be accommodated within reporting requirements, reflecting Hong Kong’s commitment to the standardization of digital assets.
Hong Kong sets standards for OTC crypto derivatives regulation
The consultation published by the HKMA and the SFC received a total of 12 comments from various stakeholders in the sector, including financial institutions and standards organisations. The majority of the comments received by the financial agencies were positive, indicating broad support for the proposals put forward. According to experts, this support is crucial to advancing the regulation of crypto derivatives, which have the potential to transform the financial landscape of the region, allowing for greater integration of crypto assets into international markets.
Historically, Hong Kong has been considered one of the world’s most important international financial centres. Now, with the implementation of new regulations focused on OTC derivatives, the city/region is looking to reassert its position in the financial arena and, in particular, the growing digital asset sector.
The adoption of international standards for crypto derivatives will not only facilitate the operation of local institutions in a global market, but will also attract investors and fintech companies looking for a clear and reliable regulatory environment to explore the possibilities and opportunities offered by this growing sector.
A leading international financial centre for digital assets
In its proposal, Hong Kong highlighted the implementation of the ISO 20022 standard for OTC derivatives reporting as a key step in its goal to become an international financial centre for digital assets. It underlined that this standard is widely used in the financial sector and allows for greater interoperability between different systems and jurisdictions. Therefore, by adopting this standard, Hong Kong can align itself with global best practices and facilitate the exchange of data and analysis between jurisdictions.
On the other hand, the HKMA and SFC have worked to reduce the operational burden on market participants by limiting the number of mandatory data fields to a range that matches that of the European Union, the United States and other Asia-Pacific jurisdictions. For the agencies, this balanced approach is critical to ensuring that regulation is not a barrier to innovation, but rather an enabler of growth in the digital asset sector.
In the recently submitted document, the HKMA and SFC also highlighted that crypto derivatives regulation is not only relevant to local players, but also has significant implications for international trade.
By establishing a robust regulatory framework aligned with global standards, Hong Kong can position itself as a key hub for digital asset trading, a sector that has seen exponential growth in recent years.
The new regulations will come into force next year.
The implementation of these regulations for OTC derivatives is scheduled to take effect on September 29, 2025, the agencies said after considering the majority of responses regarding the implementation date of the regulations. This, according to the agencies, provides a time frame for institutions to adapt to the new requirements.
The HKMA and SFC have also indicated that transition periods and further consultations will be undertaken to address any concerns market participants may have.
Through these new rules, Hong Kong not only seeks to improve the transparency and integrity of the crypto derivatives market but also to foster greater confidence among traditional and digital asset investors. Experts have stressed that clarity in reporting requirements and alignment with international standards are factors that could attract more global players to the Hong Kong market.
