Hong Kong’s Financial Services and Treasury Bureau (FSTB) has introduced a forward-looking, dual-track policy to guide artificial intelligence (AI) adoption in the financial sector. Aimed at enhancing efficiency and security while prioritizing customer service, the policy seeks to leverage AI’s potential in finance while addressing potential risks. The approach is designed to enable responsible AI adoption, providing a framework for innovation without compromising safety.

A Focused Strategy for AI Adoption

On October 28, the FSTB presented its policy, outlining a dual-track strategy that emphasizes both growth and caution in adopting AI. The FSTB highlighted that Hong Kong’s financial industry has shown strong interest in integrating AI into various business areas. The dual-track approach encourages AI development in finance while prioritizing responsible use, balancing opportunities with risk mitigation.

The FSTB has emphasized the importance of collaboration among financial regulators, service providers, and other stakeholders. By working together, the financial sector can adopt AI responsibly, creating a regulatory structure that supports both innovation and user protection. This collaborative approach aims to capture the benefits of AI in finance while reducing potential issues, as highlighted by the FSTB: “It’s a balancing act – capturing opportunities and mitigating risks.”

Key Areas of AI Application in Finance

The FSTB identified six key opportunities for AI within the financial sector:

1. Research and Data Analysis: Advanced data processing can enhance research accuracy and speed.
2. Building Investment Strategies: AI can aid in designing more responsive and informed investment plans.
3. Enhanced Customer Service: Automated responses and personalization can improve customer experience.
4. Automated Risk Assessment: Faster, more reliable risk assessments through AI can strengthen financial security.
5. Crime Detection and Prevention: AI-based security systems can enhance fraud detection and crime prevention efforts.
6. Workflow Automation: Automating routine tasks can improve operational efficiency and reduce costs.

Hong Kong’s financial institutions, including banking, insurance, securities, and pension fund management, are already using AI. These technologies are helping streamline operations and improve sustainability, particularly within green initiatives.

To support responsible AI integration, the FSTB plans to establish a supervisory framework to address potential risks such as job displacement, intellectual property concerns, and broader protection for stakeholders. This regulatory oversight will focus on ensuring that AI-driven tools are both secure and fair, minimizing risks to employees, customers, and the wider public.

New Crypto OTC Regulations on the Horizon

In addition to AI regulations, Hong Kong’s Securities and Futures Commission (SFC) is preparing to introduce new guidelines on cryptocurrency over-the-counter (OTC) services. By November, the SFC will issue a circular outlining regulations and risks specific to AI applications within finance. Additionally, the SFC plans to work with the Customs and Excise Department (C&ED) to oversee companies offering crypto OTC trading, which allows users to buy and sell cryptocurrencies privately. This move follows a proposal from February to bring crypto OTC services under a licensing framework.

Hong Kong’s dual-track AI policy aims to create a balanced ecosystem for AI adoption in finance, fostering innovation while safeguarding against potential challenges. By promoting responsible AI use and strengthening crypto regulations, Hong Kong is positioning itself as a progressive hub for financial technology, supporting growth in both AI and crypto while ensuring safety and integrity across the industry.