Hong Kong’s Financial Services and Treasury Bureau (FSTB) has introduced a new policy to guide the responsible adoption of artificial intelligence (AI) in the financial services industry, focusing on improving efficiency, security, and customer service while addressing potential risks. The policy, unveiled on Oct. 28, emphasizes a “dual-track approach” to foster AI development within the sector while carefully managing the challenges AI presents.
Hong Kong’s financial services industry has shown a strong interest in AI, and the FSTB’s policy aims to support this trend by providing a balanced framework for AI implementation. The policy outlines the government’s intention to work closely with financial regulators and service providers to ensure that AI adoption is both beneficial and secure.
Key Aspects of the Dual-Track Approach
The FSTB’s policy focuses on two main areas: capturing opportunities and mitigating risks. The government aims to help the financial sector leverage AI to enhance various operations while ensuring responsible use. The statement highlights six major areas where next-generation AI applications are expected to deliver significant value:
- Research and Data Analysis
- Investment Strategy Development
- Enhanced Customer Service
- Automated Risk Assessment
- Crime Detection and Prevention
- Workflow Automation
These applications are already being used across different sectors in Hong Kong, including banking, securities, insurance, accounting, pension fund management, and even green finance initiatives.
Mitigating AI Risks
While the policy emphasizes the potential benefits of AI, the FSTB also recognizes the associated risks. These include concerns over job displacement, intellectual property protection, and the need to safeguard all stakeholders involved in AI applications. To address these risks, Hong Kong plans to establish a comprehensive supervisory framework that will guide the responsible implementation of AI in the financial sector.
Regulatory Collaboration
The FSTB stressed the importance of collaboration between government bodies, financial regulators, and service providers to ensure that AI is used effectively and securely. This “team effort” is seen as crucial in striking a balance between fostering innovation and mitigating potential risks.
Securities and Futures Commission to Clarify AI Obligations
In addition to the FSTB’s policy, the Securities and Futures Commission (SFC) of Hong Kong is preparing to release further guidelines on AI adoption. In November, the SFC will issue a circular to clarify the regulatory obligations for financial firms implementing AI, which is expected to address the legal and operational challenges posed by AI technologies in finance.
Hong Kong’s Push for Crypto OTC Regulation
Alongside its focus on AI, the Hong Kong government is also progressing with new regulations for cryptocurrency over-the-counter (OTC) trading services. The SFC is set to release new rules and licensing requirements for these services, which allow private trading of cryptocurrencies, often in large, off-market transactions.
In September 2023, the SFC sought feedback from stakeholders on the proposal to introduce a new licensing regime for crypto OTC services. The regulation would involve both the SFC and the Customs and Excise Department (C&ED) overseeing the sector. Previously, the C&ED was expected to manage this regulation on its own, but under the new framework, both agencies will collaborate to supervise the growing crypto OTC market in Hong Kong.
This dual focus on AI and cryptocurrency regulation marks a significant step in Hong Kong’s efforts to position itself as a global financial hub, with a commitment to both technological innovation and regulatory oversight.
