The Hong Kong Insurance Authority is pondering a new approach that would permit insurers to set aside capital for cryptocurrencies along with infrastructure projects. Bloomberg reported on Monday that the city’s regulatory body is reviewing its risk-based capital regime to both bolster the insurance sector and drive economic progress.
Crypto investments would incur a full 100% risk charge, meaning insurers must maintain regulatory capital equivalent to the total value of their cryptocurrency assets. Besides cryptocurrencies, the suggested regulation would also encompass infrastructure investments, particularly critical as Hong Kong confronts a significant budget deficit. Feedback from some firms indicated a need for broader coverage, highlighting the current proposal’s substantial constraints.
A spokesperson mentioned that the authority is currently gathering insights from the industry and plans to open public consultations soon.
The Hong Kong Insurance Authority has not commented on inquiries from Cointelegraph.
Hong Kong Insurance Authority headquarters.
Source: Ceeseven, CC BY-SA 4.0
Investment in Crypto Gaining Traction in Insurance
Investments by insurance firms in cryptocurrencies are increasingly mainstream. In March, the European Union’s insurance regulator proposed a comprehensive rule requiring insurers to hold capital equivalent to the value of their crypto assets, mirroring the emerging regulations in Hong Kong.
Some insurance firms have also ventured into cryptocurrencies to Realize their objectives. For instance, in March, the Barbados-based insurer Tabit raised $40 million in Bitcoin to strengthen its balance sheet and underwrite traditional insurance policies. Germany’s leading insurance enterprise, Allianz, also made an investment in a convertible note offered by a Bitcoin treasury firm last November.
Notably, pioneers like Massachusetts-based MassMutual made substantial moves earlier, purchasing $100 million in Bitcoin for its investment portfolio by the end of 2020. At that time, this acquisition amounted to approximately 5,470 BTC at $18,279 per coin, which would now be valued over $488 million given the current price exceeding $89,000.
Hong Kong’s Commitment to Cryptocurrency
Recently, Hong Kong is placing significant focus on the crypto sector. In November, the Hong Kong Monetary Authority (HKMA) debuted its Fintech 2030 strategy, highlighting real-world asset tokenization as a burgeoning trend capturing global institutional attention. Hong Kong also began enforcing stablecoin regulations in August, reportedly attracting applications from banks in mainland China.
Nevertheless, the mainland authorities maintain a firm stance against cryptocurrencies, prohibiting activities such as mining and trading. In August, regulators urged local businesses against disseminating research or hosting events about stablecoins, and subsequent reports indicated that firms in mainland China engaged in cryptocurrency activities in Hong Kong may be compelled to withdraw from such operations.
