China’s anti-crypto stance is well-known. Industry observers have been surprised by the mainland’s apparent support for Hong Kong’s pro-crypto stance.
Although cryptocurrencies are banned in China, the government of the country is not interfering with Hong Kong’s crypto policy. On Monday, the territory announced that it would roll out a new policy on digital assets. The aim is to permit retail investors to trade digital assets. The policy is meant to support the territory’s bid to become a crypto haven at a time when a country like the US is cracking down on crypto companies.
The policy will see individuals trade larger volumes of digital assets on exchanges that are licensed by the Securities and Futures Commission of Hong Kong. The regulator has put safeguards in place to ensure that investors are adequately protected. These include a knowledge test, limits of exposure, and risk profiles.
Indexes from traditional finance
According to the report, the SFC has not yet specified which digital assets would be approved for investment. However, it made obvious the fact that the agency is looking at indexes from providers that are experienced in the traditional finance space.
The Bloomberg report said,
“The city’s current regime for crypto exchanges is a voluntary one that restricts these to clients with portfolios of at least HK$8 million (S$1.4 million). HashKey Group and BC Technology Group’s OSL exchange are the only two with permits.”
Authorities are consulting with stakeholders to fashion out a crypto policy. This will take cognizance of retail trading of virtual assets. The consultations are due to end on March 31, while a licensing program for cryptocurrency exchanges is due on June 1. A spokesperson for the SFC said that the top-capitalized cryptocurrencies, Bitcoin and Ethereum, are in the sights of regulators for approval in the policy.
Restoring Hong Kong’s position as a financial hub
Hong Kong’s stance towards digital assets became obvious last October, when the territory moved to restore investor confidence in its reputation as a finance hub. Regulators are aware of the volatility and risks associated with digital assets. Last year, the global crypto industry lost $1.5 trillion on account of bankruptcies and market downturns. Among the high-profile cases is an exchange called FTX. Hong Kong regulators intend to learn from these losses in order to create a working framework that protects investors and businesses.
Despite the fact that the agency has not named approved indexes, the consultation document made it clear that it is the responsibility of the exchanges to ensure that listed assets are the right ones to be traded by individual investors. The government has already given its nod to Bitcoin and Ethereum futures offered by CME Group this month.
Crypto companies are looking towards financial hubs that have exhibited moderation towards digital assets. Dubai, Singapore, and Hong Kong have become top destinations for blockchain companies in recent times. This is due to the conscious efforts of their governments to make laws that do not stifle the industry.
Catalysing the next crypto boom
The stance of the government in Hong Kong is likely to open up the crypto market in China. Beijing has banned almost everything related to cryptocurrencies, but with the government giving Hong Kong free rein in managing its crypto policies, it is expected to spread to the mainland.
Some executives of crypto companies are already predicting that Asia will herald the next crypto boom. These include Cameron Winklevoss, the co-founder of Gemini, who wrote in a Twitter post that “the next bull run is going to start in the East.”
Justin Sun, the co-founder of Tron, wrote on Monday that Huobi Global is one of the exchanges that applied for licenses to operate in Hong Kong.