The city recommended limiting bitcoin trading to accredited investors last year. As a result, several bitcoin businesses relocated to countries with better rules, such as Dubai and Singapore.

Hong Kong declared that it will investigate the property rights of tokenized assets and propose making smart contracts legal in order to provide a stable legal basis for their development.

It also plans to adopt "appropriate regulations" on the "administration, stability, and redemption mechanism" of stablecoin.

The proposal comes as Singapore considers a series of stringent restrictions governing virtual digital assets, while China steps up its efforts to crack down on cryptocurrency exchanges.

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Hong Kong's financial secretary, Paul Chan, said, We want to make our policy position clear to the global market to show how committed we are to exploring fintech with the global virtual asset community. Hong Kong also said that bitcoin futures and ether futures on the Chicago Mercantile Exchange will be the only underlying assets at first.

Hong Kong similarly explains its intentions in a policy announcement, stating that the Securities and Futures Commission will hold a public consultation on how to offer "appropriate degree" access to virtual assets to retail investors under the new licencing regime.

According to a statement issued by the Financial Services and Treasury Bureau, "We recognise that VA [virtual asset] is here to stay, given how it has piqued the interest of international investors and is increasingly seen as a conduit for financial innovations, not to mention the future opportunities that will be made available as VA moves into Web 3.0 and the Metaverse.

The government and financial regulators want to establish an environment that encourages responsible and sustainable growth in the Hong Kong VA business.

The CEO of cryptocurrency exchange FTX and a well-known supporter in the sector, Sam Bankman-Fried, called Hong Kong's actions today "very encouraging," but added that if only the region had taken this stance last year, in reference to the aggressive exodus that Hong Kong's previous proposal triggered.

I particularly like when officials communicate constructively and joyfully with the people who matter the most for the direction of an industry: the customers, he said in a tweet.

Hong Kong said in a statement on Monday that it would conduct pilot programmes to investigate the technological advantages of virtual assets and how they might be employed in financial markets. Among the test projects cited are the issuance of NFTs, the tokenization of green bonds, and the possible launch of retail Central Bank Digital Currency, the eHKD.

Hong Kong, Singapore, and Dubai have recruited crypto entrepreneurs, investors, and tech personnel from all over the world in the last five years due to their friendly attitudes toward cryptocurrency. They have recently debated how transparent they wish to remain.

Singapore proposed new laws this week that will soon require testing for ordinary investors as well as a ban on the use of credit cards and other forms of financing for cryptocurrency trading.

In two consultation papers, the Monetary Authority of Singapore expressed concern that many retail consumers may not know enough about the risks of trading digital payment tokens. This could lead them to take bigger risks than they would have been willing or able to take otherwise.