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Will Hong Kong become the new centre for cryptocurrency trading? The financial metropolis is considering allowing retail investors to trade in cryptocurrencies. The renewed Hong Kong crypto policies will focus on regulating service providers and a consultation on how retail investors can be given access to crypto assets.
A policy statement released by the government talks about a new licensing regime for virtual asset providers, tokenization of green bonds and retail trade of cryptocurrencies.
Renewed interest in Hong Kong crypto space
“We will put in place timely and necessary crash barriers to mitigate actual and potential risks in line with international standards, so that virtual asset innovations can thrive in Hong Kong in a sustainable manner,” said the statement.
In contrast, China has completely banned cryptocurrency, but it is still unclear if mainland investors will get access to Hong Kong’s crypto market.
Currently, crypto trading in Hong Kong is restricted to professional investors with portfolios of at least HK$8 m (~$1m). Few platforms are licensed for cryptocurrency trading in Hong Kong.
The Securities and Futures Commission (SFC) will study how to develop cryptocurrency exchange-traded funds (ETFs), while the Hong Kong Monetary Authority, the de-facto central bank of the city, will formulate regulations for stablecoins.
Separately, the SFC has issued a circular allowing fund companies to apply for the issuance of ETFs which tracks bitcoin futures and cryptocurrency indices. On the tokenisation side, Hong Kong will review property rights and the legality of smart contracts. The city plans to launch pilots for the same and expand its ambit to non-fungible tokens, green bonds as well as the e-HKD.
Hong Kong’s crypto move might be perceived as a threat to Singapore’s dominance in the cryptocurrency space in Asia. Singapore had previously seen Hong Kong crypto firms setting up bases in the city-state.
“They’re starting to warm to the idea of pushing into retail,” said Dave Chapman of BC Technology Group which operates OSL, a licensed crypto exchange in Hong Kong. “And I think the reason why they’re doing that is you can either try to provide consumer protection in the region of the people that you’re trying to protect. Or ultimately they’re just going to go and use a service abroad anyway.”
