Hong Kong, which has taken significant steps regarding Bitcoin (BTC) and Ethereum (ETH) and is progressing towards becoming the region’s cryptocurrency hub, has taken another important step.
Accordingly, Hong Kong has proposed a bill that would allow insurance companies to invest in cryptocurrencies.
According to Bloomberg, the Hong Kong Insurance Authority (HKIA) has released a bill that would allow insurance capital to be invested in cryptocurrencies and stablecoins.
At this point, Hong Kong is poised to become the first Asian financial center to allow insurance companies to invest in cryptocurrencies and regulated stablecoins.
The bill proposes a 100% risk weighting for cryptocurrencies, reflecting a cautious approach to crypto investments. Accordingly, insurers will be required to hold capital equal to the full value of each cryptocurrency they purchase, which underpins the high risk associated with cryptocurrencies.
For stablecoins, the situation will depend on their underlying assets. Provided they are regulated, stablecoins may carry lower risk premiums depending on the fiat currency they are pegged to.
According to the draft bill, public opinion on the proposal will be gathered between February and April 2025, and the recommendations to be submitted to the legislature are expected to arrive towards the end of the same year.
According to the proposed regulations, 158 licensed insurance companies in Hong Kong would be allowed to invest in virtual assets. Considering that Hong Kong’s insurance sector is projected to attract approximately $82 billion in premiums across these 158 companies in 2024, even a small portion of this capital flowing into cryptocurrencies could provide a significant boost to the crypto market.
*This is not investment advice.
