Hong Kong Insurance Authority Proposes Crypto and Infrastructure Investment Framework

TLDR:

• The regulator imposes a 100% risk capital charge on crypto assets to protect insurance capital stability.
• Stablecoins receive differentiated treatment with risk charges tied to their pegged fiat currencies.
• Capital incentives are offered for insurers investing in Hong Kong and mainland infrastructure projects.
• Public consultation runs from February to April 2025, affecting HK$635 billion insurance industry premiums.

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The Hong Kong Insurance Authority has unveiled proposals allowing insurers to invest in cryptocurrencies and infrastructure projects. 

The regulator plans to implement a 100% risk capital charge on crypto assets. Stablecoins would face risk charges tied to their underlying fiat currencies. 

The consultation period runs from February through April, followed by legislative submissions. This framework aims to support economic development while channeling insurance capital into government priorities. The proposal could redirect substantial funds toward strategic sectors.

Regulatory Framework for Digital Assets

The insurance regulator presented its proposal on December 4, outlining specific risk parameters for digital asset investments. Crypto assets will carry a full capital charge, reflecting their volatile nature. 

Stablecoins receive differential treatment based on their pegged currencies. Hong Kong-regulated stablecoins specifically fall under this framework. The document provides clear distinctions between digital asset categories for risk assessment purposes.

The regulator confirmed it began reviewing the risk-based capital regime this year. According to a regulator spokesperson, the review has “a primary objective to support the insurance industry and wider economic development.

” Currently, the authority is collecting industry feedback before launching the consultation. The spokesperson noted they are “at the stage of gauging industry feedback” and will put proposals for public consultation soon. The three-month consultation window allows stakeholders to provide input on the framework.

Hong Kong continues building its position as a digital finance hub through comprehensive crypto regulations. 

The city’s monetary authority expects to approve the first stablecoin licenses in early 2025. This insurance framework represents another step in the territory’s digital asset strategy. The move aligns with regional competition for crypto market leadership.

Infrastructure Investment Incentives

The proposal extends beyond digital assets to encompass infrastructure development opportunities. 

Insurers investing in Hong Kong or mainland projects could receive capital incentives. Projects listed or issued within the financial hub qualify for these benefits. The Northern Metropolis development features prominently among eligible initiatives. New town and urban area developments also meet eligibility criteria.

Hong Kong faces budget constraints while pursuing ambitious infrastructure projects. The government seeks private capital participation in the Northern Metropolis, a planned technology hub. 

This area borders mainland China and represents a strategic development priority. However, the insurance regulator maintains independence from government direction.

Industry participants have submitted feedback requesting broader infrastructure coverage. The current framework offers limited project options according to sources familiar with discussions.

 As of June, Hong Kong had 158 authorized insurers in the market. The insurance industry generated approximately HK$635 billion in gross premiums during 2024. These firms collectively represent substantial capital for the proposed investment channels.

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