New Crypto OTC Reporting Requirements Coming to Hong Kong by 2025

New Crypto OTC- HKMA and SFC Announce Plans for Enhanced Crypto Reporting

New Crypto OTC– In a significant move, two key financial regulators in Hong Kong have announced their intention to adopt new reporting requirements established by the European Securities and Markets Authority (ESMA) for cryptocurrency over-the-counter (OTC) derivatives.

Enhancing Reporting Standards in Hong Kong

On September 26, the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) revealed their plans to elevate OTC reporting requirements to meet global standards. This decision follows an extensive review of feedback from a consultation paper issued in March 2024.

As noted by Hong Kong stakeholders and investors, investments in crypto OTC derivatives cannot be easily categorized within the traditional five asset classes: interest rates, foreign exchange, credit, commodities, and equities. This highlights the need for a more tailored approach to crypto asset classification.

Embracing Digital Token Identifiers (DTIs)

To enhance clarity and tracking, some stakeholders in Hong Kong have proposed the use of Digital Token Identifiers (DTIs) to unambiguously identify crypto-asset underliers for OTC derivatives.

In response, the HKMA and SFC pointed out that ESMA began implementing DTIs in their reporting processes as of October 2023. DTIs have become a fundamental reference point for crypto asset service providers across Europe, underscoring the importance of a standardized identification system.

Furthermore, citing the necessity for a Unique Product Identifier (UPI) in transaction reporting, the Hong Kong regulators expressed their plans to adopt similar mandates in the near future. They stated, “Given that 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 accommodate the use of DTI in our reporting requirements.”

Future Outlook and New Reporting Requirements

Hong Kong authorities have recommended that the new reporting requirements be implemented by September 29, 2025. This move aligns with Hong Kong’s ongoing efforts to enhance its financial infrastructure, including the development of its central bank digital currency (CBDC), the digital Hong Kong dollar (e-HKD).

On September 23, the HKMA announced the launch of the second phase of the e-HKD pilot study, known as Project e-HKD+. This new phase will focus on three key themes: settlement of tokenized assets, programmability, and offline payments. The initiative will feature its own sandbox environment and is expected to last approximately one year, marking a new milestone in Hong Kong’s digital currency journey.

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