Source: Hong Kong Government special administrative region – 4
Following is the speech by the Secretary for Justice, Mr Paul Lam, SC, at the YBC Conference 2025: The Art of Regulation today (October 31):
Mr José Antonio Maurellet, SC (Chairman of the Hong Kong Bar Association), dear friends, distinguished guests, esteemed colleagues and young barristers, ladies and gentlemen,
A very good afternoon. It is my honour to stand before you today at the Conference organised by the Standing Committee on Young Barristers of the Hong Kong Bar Association. This year’s theme explores the regulations in art law and cryptocurrency. Some very eminent and experienced experts, including not just lawyers, will speak in the panel discussions. I shall just offer some preliminary observations.
At first glance, the two topics may seem entirely unrelated. In fact, they are both fast-evolving domains which will provide enormous opportunities for young lawyers. Hence, it is an extremely wise choice to put these two topics together in this Conference.
Art law challenges and regulations
As the world’s second-largest art market, second only to New York in contemporary art auctions, Hong Kong is a vibrant hub for artists, collectors and legal professionals alike. Our city boasts significant events such as Art Basel, and we have world-class museums like M+ and the Hong Kong Palace Museum in the West Kowloon Cultural District. Additionally, reputable auction houses like Christie’s and Sotheby’s have enhanced their presence in Hong Kong, which further solidifies Hong Kong’s status in the global art market.
Hong Kong’s unique legal framework is foundational to this burgeoning art scene. The Basic Law provides a robust legal environment that fosters artistic and cultural activities. Article 34 of the Basic Law guarantees that Hong Kong residents shall have the freedom to engage in artistic creation and other cultural activities. Further, Article 108 of the Basic Law preserves the low tax policy, and as a result, there is no capital gains tax on art pieces; which is particularly enticing for collectors and investors, and this makes Hong Kong a very attractive platform for art transactions. Moreover, Articles 114 and 115 of the Basic Law establish Hong Kong as a free port with free movement of goods which is invaluable for the art market, allowing for seamless movement of art pieces across borders.
With a solid intellectual property (IP) regime and a sound legal system supervised by an independent judiciary, Hong Kong provides effective IP protection to artists which is vital in safeguarding artistic integrity and development. Hong Kong is also the first in Asia to clarify and confirm the arbitrability of IP disputes, that is, IP disputes can be resolved by arbitration.
In addition to the above, Hong Kong’s close connection with the Mainland has provided us with further opportunities. The mutual legal assistance on the recognition and enforcement of both arbitral awards and judgments in civil and commercial matters enables certain IP disputes to be resolved efficiently by litigation or arbitration. Notably, the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region is more liberal than the 2019 Hague Judgments Convention which excludes judgements on IP disputes entirely.
As outlined in the 2025 Policy Address, the HKSAR Government will step up our efforts to build Hong Kong into a global premium art trading hub, attracting more international auction houses, galleries, and professionals to establish a presence here. Key initiatives include creating an arts ecosystem at Airport City for studios and galleries, enhancing collaboration with Art Basel, and conducting industry studies on taxation, financing and talent.
While the future looks promising, there are also significant challenges that we must address as legal professionals in art law.
One of the most pressing issues is copyright protection, particularly concerning the use of artificial intelligence (AI) in creating art – we need to explore the feasibility of having further enhancement of the Copyright Ordinance regarding the protection for AI technology development.
As the art market expands, so will the demand for legal services. Issues relating to arts pieces’ storage will require expertise in insurance law, bailment law, logistics law, and even tax and financial planning. Legal professionals will therefore be required to draft and enforce art loan and trading agreements in order to ensure that ownership and authenticity of the art pieces are clearly defined and protected.
Development of cryptocurrency in Hong Kong
Hong Kong is a leading international financial centre in the world. Under Article 109 of the Basic Law, we shall provide an appropriate economic and legal environment for the maintenance of such status.
As outlined in the 2025 Policy Address, the HKSAR Government is committed to supporting steady fintech development, including encouragement of tokenisation of assets, offering diverse digital asset products to professional investors, and introducing automated reporting and surveillance tools to mitigate risks associated with digital assets. We believe that true innovation in finance would only thrive in a clear, fair and reliable regulatory setting.
Important legal developments in recent years – enhancement of legal and regulatory framework
I wish to highlight some important legal developments in recent years in this respect.
(a) Licensing of virtual asset service providers since 2023
Firstly, by amending the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, we have introduced a licensing regime for virtual asset service providers effective from June 2023 to align with international standards set by the Financial Action Task Force. Anyone running a virtual asset exchange in Hong Kong must obtain a licence from the Securities and Futures Commission (SFC). Licensees must meet a fit-and-proper test and comply with investor protection, money laundering and terrorism financing requirements. As of September this year, 11 virtual asset trading platforms have been licensed to offer cryptocurrency trading to retail investors. To address risks seen in the collapses of JPEX and AAX, these platforms must secure insurance for customers’ assets, properly segregate client assets, comply with financial resources requirements and prevent conflict of interest. The SFC has broad powers to supervise, investigate and enforce, with penalties for non-compliance ranging from administrative actions to criminal sanctions.
(b) Enacting the Stablecoins Ordinance in 2025
Second, the Stablecoins Ordinance, enacted in May and becoming effective in August this year, seeks to lay a solid foundation for the sustainable development of the stablecoin industry. Only issuers licensed by the Hong Kong Monetary Authority (HKMA) or certain entities can offer stablecoins publicly. As one of the first jurisdictions to put in place a regulatory framework for stablecoin issuers, the HKMA has imposed rigorous requirements to guard against financial stability risks and to promote investor protection. These include requiring licensees to have a local presence, maintain reserve assets at least equal to the stablecoins’ par value, allow easy redemptions without excessive fees, ensure that key personnel are fit and proper, and implement strong risk management to prevent misuse of funds. The law also bans misleading promotional materials and creates offences for unlicensed operations or fraudulent transactions. Under the Stablecoins Ordinance, the HKMA has robust powers for licensing, enforcement and penalties, with a Stablecoin Review Tribunal established to review its decisions.
Intended reforms in future
(a) Proposal to limit unlicensed virtual asset platforms from using misleading names
Looking ahead to future reforms in this fast-developing area of law, in June this year, the SFC launched a consultation aimed at restricting unregulated entities from improperly adopting names that may mislead the public into believing that such unregulated entities are regulated ones. The proposed reform aims to: (i) prohibit names that falsely suggest SFC regulation or licensing, such as those implying operation as an “SFC-regulated exchange or clearing house”, or an “SFC-licensed virtual asset trading platform”; and (ii) prevent misleading titles that imply affiliations with established financial entities, whether in Hong Kong or overseas, without genuine connections.
(b) Proposal to regulate over-the-counter virtual asset dealing and custodian services
The SFC also held consultations with the industry and the public on the proposal to regulate service providers involved in over-the-counter virtual asset dealing and custodian services, with a view to further enhancing investor protection, combating financial crime, and maintaining market integrity and stability. Under the proposed licensing regime, the service providers would be licensed by SFC. They would be subject to the fit-and-proper test and requirements relating to anti-money laundering, financial resources, risk management and investor protection.
Judicial developments
Notably, the Hong Kong’s Judiciary has also adopted innovative measures, likely to be the first in the world, to assist victims in cryptocurrency-related cases. In BP SG Investment Holding Limited v Chen Shanxian, a fraudster transferred victims’ assets into anonymous, decentralised, non-custodial cryptocurrency wallets, making identification and service of court documents extremely difficult and challenging. To address this issue, the Court permitted substituted service of an injunction order via a tokenised order, through a messaging platform between virtual asset wallets, and airdropping a non-fungible token, commonly known as NFT, containing a hyperlink to the court order. This method of service effectively “taints” the wallets in the sense that all subsequent transactions that follow the service can be traced to the blockchain and the existence of the injunction can be seen, and hence transactions with those wallets will be deterred.
Challenges and opportunities
On the other hand, it must be recognised that cryptocurrency may be misused for money laundering and other unlawful or improper behaviour. This is countered by Hong Kong’s existing regulatory and criminal law framework. As digital assets grow in complexity, the law in this area evolves rapidly and demands high technical expertise. I would encourage young barristers to also take part in navigating, shaping, and upholding the law in this evolving field.
Hong Kong International Legal Talents Training Academy
Apart from advising policy bureaus, drafting new laws in these areas and prosecuting crimes involving cryptocurrencies, the Department of Justice also puts a great emphasis on capacity building, including for local lawyers through the Hong Kong International Legal Talents Training Academy.
Launched in November last year, the Academy is an important initiative to provide capacity-building, exchanges and knowledge-sharing for professionals from the legal and dispute resolution sectors in Hong Kong, the Chinese Mainland and across the globe. Since its launch, the Academy has organised diverse training programmes in Hong Kong, the Chinese Mainland and abroad.
For instance, it co-organised the “Workshop on Use of International Instruments to Legally Enable End-to-End Digitalization of Trade” with the United Nations Commission on International Trade Law (UNCITRAL) last August where international trade law experts and policymakers from different economies discussed how international law instruments could facilitate a harmonised, legally enabling environment for digitalisation of the whole business lifecycle.
Last week, the Academy hosted the “Legal Practical Training Course for Chinese Enterprises Going Overseas” for 30 legal counsel and compliance officers from state-owned enterprises on the risks encountered by Chinese enterprises going overseas and the applicable compliance strategies with lectures on hot topics including stablecoins and global intellectual property.
This December, the Department of Justice will host its annual flagship event – Hong Kong Legal Week 2025 with the theme “Linking Laws, Bridging Worlds”. The Academy will collaborate with UNCITRAL again to co-organise the 6th UNCITRAL Asia-Pacific Judicial Summit 2025, during which judges, officials, legal experts and scholars across various jurisdictions will explore digitalisation of trade and possibly covering issues relevant to cryptocurrency.
Looking ahead, I anticipate more collaborations with the Bar Association, including the YBC, to further enhance Hong Kong’s legal expertise in these areas. Opportunities for young and future lawyers in the realms of art law and cryptocurrency are abundant. It is imperative that we equip ourselves with the necessary knowledge and skills and proactively seize these opportunities as they arise.
Last but not least, I would like to take this opportunity to invite all those who are eligible to exercise your right to vote in the upcoming Legislative Council General Election on December 7. Your active participation is not simply a valuable exercise on a very important constitutional right; it is also a very important choice that will contribute to the future of our legal system, our legal practice and the rule of law, as well as the general well-being of our society.
On this note, I wish you all a very fruitful and constructive conference this afternoon. Thank you.