Hong Kong regulators are gearing up to align their cryptocurrency over-the-counter (OTC) derivatives reporting standards with those set by the European Securities and Markets Authority (ESMA), including the use of Digital Token Identifiers (DTIs).
Two of Hong Kong’s top financial regulators—the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC)—announced this shift on September 26. This move follows a review of feedback from a consultation paper, with plans to raise their reporting requirements to global standards by March 2024.
Shifting to Global Standards in Crypto OTC Derivatives
Currently, crypto OTC derivatives in Hong Kong don’t fit into traditional asset classifications, such as interest rates, foreign exchange, credit, commodities, and equities. This gap has driven the need to adopt updated frameworks that better reflect the growing crypto-asset market.
Hong Kong stakeholders recommended adopting Digital Token Identifiers to clearly identify the underlying crypto assets in OTC derivatives transactions. Responding to this, the HKMA and SFC noted that ESMA had introduced DTIs into their reporting structure in October 2023, setting a precedent across Europe.
As part of Hong Kong’s transition, the regulators expressed their intent to adopt the Unique Product Identifier (UPI) in reporting transactions, mirroring the European approach:
“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.”
The regulators will continue to observe how other global jurisdictions implement similar mandates and adjust accordingly.
New Reporting Requirements by 2025
Hong Kong’s authorities have outlined plans to implement these new reporting regulations by September 29, 2025. This timeline reflects the region’s push to maintain global competitiveness while ensuring regulatory consistency with international standards.
In addition to aligning crypto OTC derivative rules, Hong Kong continues to advance its digital financial ecosystem. Recently, the HKMA launched the second phase of its central bank digital currency (CBDC) pilot, known as Project e-HKD+. This new phase, which started on September 23, will focus on exploring tokenized assets, programmability, and offline payments. It will operate in a sandbox environment for about a year.
