Hong Kong is actively positioning itself as a key crypto hub in the region by reopening trading to retail investors. New crypto rules in China could facilitate adoption, challenging the country’s historical anti-crypto stance. The regulatory requirements for virtual asset trading platforms will mandate “suitable” onboarding processes, disclosures, and more. Additionally, tokens traded on these platforms will have to meet a “minimum criteria” to safeguard retail investors against market manipulation.
Milestone for Hong Kong’s Virtual Assets Industry
Lennix Lai, CCO of OKX, a Hong Kong-based company, expressed his welcome and appreciation for the Securities and Futures Commission’s (SFC) decision to allow virtual asset trading by retail investors in Hong Kong. This milestone is significant for Hong Kong’s virtual assets industry, poised for further growth and development. Bitcoin and Ethereum are likely to meet listing criteria, but lower-cap tokens may face more uncertainty.
Only two crypto firms have obtained licenses from the SFC, and the guidelines will be effective from June 1, 2023. Lennix Lai, CCO of OKX, praised positive adjustments in the final regulations, like removing the legal opinion requirement.
As Hong Kong is a Special Administrative Region under China’s control, experts suggest that the latest crypto rule change could also open the door for the reintroduction of cryptocurrencies in mainland China, where they were effectively banned in 2017.
Flowdesk’s Perspective on China’s Shift in Digital Assets
Anne-Sophie Cissey, Flowdesk’s head of legal and compliance, stated that this aligns with Hong Kong’s traditional role since its handover to the People’s Republic of China in 1997 and the implementation of the “one country, two systems” model.
Flowdesk, a company with offices in Paris and Singapore, provides trading infrastructure for market-making and other crypto-financial services.
Cissey, head of legal and compliance at Flowdesk, considers China’s shift in thinking on digital assets as a significant development following the country’s longstanding ban. Authoritarian regimes often oppose decentralization and transparency, key principles of blockchain technology, according to Cissey. Hong Kong’s crypto-friendly approach may indicate that Beijing is using it as an experimental zone.
A Return to the Digital Currency Frontier
These recent developments have the potential to restore Hong Kong’s status as a prominent crypto hub in the region. The introduction of the extradition bill and the ensuing riots had a negative impact on Hong Kong’s crypto aspirations. The government eventually withdrew the bill.
Anne-Sophie Cissey believes that the crackdown on Hong Kong’s democracy during the pandemic diminished its business appeal. Hong Kong’s business environment suffered setbacks, leading major banks and financial institutions to relocate or scale down. Banks and financial institutions have scaled down or relocated operations due to concerns about mainland China’s interference.
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