By Richard Hines
Despite the high bar of crypto regulations, Hong Kong is open to welcoming crypto operations and making minor regulatory changes as needed. This announcement was made at the Fintech Opening Week on Monday, when the regulator revealed their intention in re-establishing Hong Kong as a Crypto Hub.
Hong kong Crypto Stance Throughout Time
Hong Kong was not always a rigorously controlled crypto route, at that time, trading in Hong Kong was once favored to trading in Singapore.
Retail traders and crypto businesses operating at the time had free and unlimited access to crypto negotiations and activity. The Bitmex had an office directly above the Securities and Futures Commission (SFC) and was conducting crypto activities with no interference from the SFC or rules.
When the SFC began paroling, exchanges became concerned about the impact on their operations. They were particularly concerned about the penalties for listing tokens without first seeking legal advice on if they were registered and securities tokens. The cost of obtaining a legal opinion was excessive, totaling $10,000 each token.
The regulators began issuing warnings and implemented a leverage system. This approach enabled virtual asset providers engaged in securities and trading services to receive licenses. It was, however, a challenging process; only two enterprises completed this stage and received their licenses.
Other crypto businesses found it difficult to operate under this licensing framework because most could not obtain this license. They did, however, continue to use unregulated exchanges.
Then China banned crypto currency, but political authorities declared that it was a one-country, two-systems principle, which meant that even if China banned crypto, Hong Kong still had the legal right to run their operations in their own way. However, this mantra was not persuasive enough to convince the retail traders to stay since they were concerned about how long Hong Kong could keep this up, so they fled to Singapore in droves.
Hong Kong On Crypto Licensing And Regulation
The Virtual Assets Service Providers license goes into effect in March 2023, and applicants have a nine-month window to complete their licensing. After this time, either exchanges will be licensed or they will be unable to operate.
Annabelle Huang, Managing Partner of Amber Group, emphasized the necessity of clear regulations, adding that what was done in the past was self-regulation and applying the tightest regulation standards on enterprises.
Padraig Walsh, a Partner at the Law Firm, also acknowledged that Hong Kong’s new set of restrictions is intended to be long-term and not for many, but for a few—those who are able to obtain a license to begin operations.