Hong Kong Financial Regulators to Adopt Global Reporting Standards for OTC Crypto Derivatives

Hong Kong's financial regulators, including the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC), have announced plans to align the region's over-the-counter (OTC) crypto derivatives reporting framework with global standards, similar to those established by the European Union.

This decision follows a March 2024 consultation that gathered input from financial institutions, industry bodies, and stakeholders who emphasized the need for standardized practices to facilitate seamless cross-border transactions and ensure compliance.

The upcoming reporting requirements will introduce Digital Token Identifiers (DTIs) and Unique Product Identifiers (UPIs), aligning with the European Securities and Markets Authority (ESMA) standards that were already adopted in October 2023. The new regime is set to take effect by September 29, 2025.

Stakeholders highlighted challenges in categorizing crypto OTC derivatives within the existing asset classes, prompting the regulators to respond with the intention to adopt DTIs for crypto-asset underliers.

The HKMA and SFC noted that incorporating identifiers like UTIs and Critical Data Elements (CDEs) will enhance the international standardization of data across OTC derivatives markets. In their joint statement, the agencies stressed the importance of transparency and consistency, stating that the adoption of these identifiers will enable regulators to gather accurate data on trades, thereby improving market monitoring and fraud detection.

This overhaul coincides with Hong Kong's ongoing initiatives in digital currency, including the recent launch of the second phase of its digital Hong Kong dollar (e-HKD) pilot project.