Crypto spring is just around the Riverbend, according to Hong Kong. The Chinese neighbor is making waves in the crypto industry as they prepare to release official regulations regarding how crypto firms and exchanges operate in the Asian megalopolis.
What can we expect from the Hong Kong government? Well, for starters, they are looking much more bullish toward Bitcoin and Ethereum than China has historically.
The Hong Kong government is also trying to draw entrepreneurs and visitors back to the Asian capital after years of COVID-related issues and protests led to the shutdown of the city. But this season, they are open and ready to crypto mingle.
Reasons for Optimism in Hong Kong
This past Monday, the Hong Kong Securities and Futures Commission (SFC) published draft rules for virtual asset trading platforms (crypto) and sought public feedback. As part of the new licensing regime set to take effect in June, the SFC plans to require cryptocurrency exchanges to apply for licenses that would allow retail investors to trade certain large capitalization tokens (think Bitcoin and Ethereum).
Just last month, the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, said in a consultation document that it plans to introduce a mandatory licensing regime for stablecoin issuers as early as this year and will not allow algorithmic stablecoins (remember Celsius?)
Mainland China technically banned cryptocurrency transactions in 2021, but Hong Kong has set up a new licensing regime that may eventually extend to retail crypto trading. Current regulations in Hong Kong (a special administrative region) allow only institutions and professional investors with portfolios of US$1 million or more to trade digital assets.
Which clearly limits the pool of investors to those with deep pockets.
Thoughts from Angela Ang
“Like many of its global counterparts, including Singapore, the SFC is attempting to thread the needle between digital asset innovation and investor protection in a post-FTX world,” said Angela Ang, senior policy advisor at California-based blockchain intelligence firm TRM Labs and a former regulator at the Monetary Authority of Singapore.
As Hong Kong continues taking a crypto-friendly regulatory approach after it announced its pro-crypto stance in October, the industry may see more Web3 businesses setting up shop in the city, experts said.
Crypto exchange Huobi Global, for example, is applying for a crypto trading license in Hong Kong, said Justin Sun, an advisor to the exchange, in a Monday tweet. Sun also told Nikkei Asia that Huobi is looking to relocate its Asia headquarters from Singapore to Hong Kong.
“The proposed policy went into more detail on anti-money laundering and know your customer with new requirements such as conflict of interest also included. Overall, this is good for the industry safeguarding the rights of retail investors,” Wang said.
Heavy Hitters are Bullish on Hong Kong for Crypto
More exchanges are likely to expand their businesses to Hong Kong if the city continues its crypto-friendly stance. “I’m very bullish on (Hong Kong),” Henry Liu, CEO of BTSE, a crypto exchange based in the British Virgin Islands with half of its operations in Taiwan, told Forkast. “If we get to be compliant ourselves, we will go in, and as a company, if we need to find a local partner and we can support them in any way, we’re happy to do that as well.”
Non-fungible token (NFT) firms have also shown interest in expanding in Hong Kong. But for now, let’s just be thankful Hong Kong is opening its doors again.
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