By George Ward
Previously, Hong Kong served as a hub for cryptocurrency operations. However, due to a crackdown by the Chinese authorities on virtual assets and the recent departure of skilled personnel during a prolonged period of strict quarantine measures related to Covid, it has lost that status.
Hong Kong has introduced a new licensing system this year, hoping to attract companies and developers who moved to Singapore and other locations and regain its status as a top crypto hub.
However, initial results seem uncertain as cryptocurrency firms and their lawyers already request changes to the proposed rules. The firms claim they are too strict and may not draw in the required level of businesses to fulfill the government’s aim of re-establishing the town as a virtual asset hub.
Industry members drafting responses for the public consultation have identified several concerns they plan to highlight to the Securities and Futures Commission (SFC). These include a restricted set of eligible tokens for exchanges to provide to retail investors, ambiguous licensing regulations, and demanding cold storage requisites.
Last month, Hong Kong’s SFC disclosed the new obligatory licensing system for service providers and cryptocurrency exchanges. At the same time, the SFC relaxed a prohibition on cryptocurrency companies focusing on retail investors.
The proposed modifications were released for public discussion, and industry participants have until March ending to submit their feedback.
Hong Kong Cryptocurrency Aspirations
A partner at Gibson Dunn – William Hallat, emphasized the significance of a workable regime. He says some adjustments and modifications are necessary to ensure its efficacy.
He stated that if the regime leads to the dominance of a few small players, it will be unfavorable for everyone involved. The province’s government considers the correct implementation of the cryptocurrency licensing groundwork a crucial policy domain.
Officials have expended considerable effort towards the crypto-asset class and its associated technology, intending to reclaim the city’s crypto hub status. Senior leaders frequently boast of the city’s cryptocurrency aspirations in conferences and meetings.
Thus, there is a sense of priority, partly stemming from realizing there is an opportunity to establish itself as a reputable regulated center for virtual assets. This opportunity arises when other markets, particularly the United States, are grappling with how to regulate the industry.
During a Web3 summit by Aspen Digital, Financial Services Secretary and Treasury–Christopher Hui stated that since introducing the new regulations at the end of February, 80 cryptocurrency service providers had expressed an interest in running their operations in Hong Kong.
A regulatory agency spokesman stated that the public debate is ongoing, and all received opinions will be considered before publishing the consultation’s conclusions at an appropriate time.