Bloomberg says new crypto rules in Hong Kong create uncertainty for its path to becoming a digital asset hub.
The financial regulator of Hong Kong has implemented its new regulatory framework for cryptocurrency on June 1st. The new rulebook will allow retail investors in the city to trade specific “large-cap tokens” on licensed exchanges, provided that safeguards such as knowledge tests, risk profiles, and exposure limits are put in place. Hong Kong’s Securities and Futures Commission (SFC) will also start providing licenses to cryptocurrency exchanges. The framework prioritizes investor protection over cost-saving for cryptocurrency exchanges as Hong Kong aims to become a leading digital-asset hub. This is due to the crypto crash last year that exposed risky practices and outright fraud. The Hong Kong government hopes that China may one day invest in cryptocurrency through Hong Kong, as some of the vast Chinese wealth flows through the city. However, the crypto industry has been cautious over the regulatory changes, citing concerns about the costs and complexities of adhering to such exacting rules. Despite this, several leading digital-asset platforms such as Huobi, OKX, and Amber Group have applied for licenses under the new crypto regime. Bobby Lee, who set up China’s first Bitcoin exchange, warned that Hong Kong’s ambition to become a crypto hub may not be sustainable. He claimed that officials who let exchanges obtain a license may have overblown expectations for connecting with mainland China as digital asset trading remains banned in China. On the other hand, Hong Kong officials have claimed that the city is pushing for Web3 and blockchain to position itself as a hub for digital innovation in Asia. Last week, the Hong Kong Police Force even launched CyberDefender, a new metaverse platform aimed at educating the public about the potential dangers associated with Web3 and the metaverse.