The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) plan to update the reporting standards required for crypto over-the-counter (OTC) derivatives with innovations such as Digital Token Identifiers (DTI).

In a statement made on September 26, Hong Kong’s regulators said they will align OTC reporting requirements with global standards after reviewing responses to an advisory published in March 2024.

Stakeholders investing in Hong Kong emphasized that crypto OTC derivatives investments cannot be categorized under the existing five traditional asset classes, namely interest rates, foreign exchange, credit, commodities and equities. Therefore, some stakeholders have suggested the use of DTIs to clearly identify crypto asset sub-entities for OTC derivatives.

The HKMA and SFC stated that ESMA has included DTIs in its reporting processes as of October 2023. DTIs currently serve as a key reference point for crypto asset service providers in Europe.

Hong Kong regulators also noted the requirement for a Unique Product Identifier (UPI) in reporting transactions and announced that they plan to implement this obligation in their jurisdictions as well.

According to regulators, “Due to the inclusion of the Digital Token Identifier as a permissible value in the ‘Sub Asset ID (OTHER)’ data field in the upcoming consultation of version 4 of the CDE Technical Guide, we will enable the use of DTI in our reporting requirements.” expressions were used.

However, authorities will continue to monitor the consequences of mandates imposed by other jurisdictions and will adopt similar regulations in their jurisdictions as deemed necessary.

Hong Kong has proposed implementing new reporting requirements by September 29, 2025. This step will strengthen the region’s regulations in the field of cryptocurrencies and digital assets, while also helping it comply with international standards.

This innovative approach by Hong Kong towards the cryptocurrency ecosystem could increase trust among investors and financial service providers.

Additionally, Hong Kong has made significant progress in developing its own central bank digital currency (CBDC). In September 2023, the HKMA announced the launch of the second phase of the digital Hong Kong dollar (e-HKD) pilot.

The project will focus on three key themes such as e-HKD+, liquidation of tokenized assets, programmability and offline payments. This new phase will last about a year and will have its own sandbox.

These regulatory steps provide a great opportunity for Hong Kong to compete internationally in the cryptocurrency industry. These steps taken to strengthen the confidence of investors and financial institutions will help the region establish a stronger foundation in the digital assets and cryptocurrency market.