Hong Kong Regulators to Release Guidelines for Crypto Exchange Licenses in May

Jimmy Aki
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Hong Kong’s long-awaited crypto licensing system is set to go live in May. According to the new regulations, retail investors can trade well-known cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) from June 1.

A Much-Anticipated Proposal for Crypto Enthusiasts in Hong Kong

Hong Kong is set to release guidelines for cryptocurrency exchanges in May, as it positions itself as a leading hub for cryptocurrencies.

Julia Leung, the CEO of Hong Kong’s Securities and Futures Commission (SFC), revealed this at a Bloomberg event.

In February, the SFC issued a consultation paper outlining its proposed regulatory framework for cryptocurrency trading platforms. According to Leung, the consultation paper has received over 150 comments from interested parties.

The reports primarily focused on Know Your Client (KYC) and Anti-Money Laundering (AML) regulatory requirements.

Furthermore, as announced earlier this year, the SFC will allow retail investors to trade specific digital currencies under a new licensing framework for crypto platforms that will go into effect in June.

Leung explained that the recent turmoil in the cryptocurrency ecosystem and the demise of key firms such as FTX are the primary motivators for the sector’s need for clear regulatory standards that prioritize investor protection.

In a speech on March 20 in Hong Kong, Christian Hui, the Secretary for Financial Services and the Treasury, claimed that several cryptocurrency companies from around the world had shown interest in Hong Kong since October 2022.

He mentioned that 23 cryptocurrency companies have expressed their intention to set up operations in the country.

The companies include blockchain network security firms, blockchain infrastructure firms, and virtual asset exchanges.

However, most prospective Virtual Asset Service Provider (VASP) licensees are still awaiting confirmation, and several trading platforms have already begun offering investors cryptocurrency-related services while still under SFC regulation.

The regulator is also involved in several pilot projects, such as the tokenization of green bonds and the establishment of Hong Kong’s own central bank digital currency (CBDC), to assess the benefits of digital assets and their applications in financial markets.

Reuters reports that OSL and Hashkey Group are two of the few exchanges that the SFC has previously granted licenses.

Hong Kong Aspires to Become Asia’s Top Crypto Hub

The connection between Hong Kong business and mainland China, where crypto trading and Bitcoin mining were first banned in 2017, remains unclear as Hong Kong intensifies efforts to adopt a more lenient stance toward cryptocurrencies.

The establishment of Hong Kong’s new cryptocurrency laws coincides with the city’s aggressive Web3 and blockchain efforts to establish itself as an Asian powerhouse for digital innovation.

In the wake of a legislative crackdown on cryptocurrency in the U.S., the city has also witnessed a substantial increase in interest from crypto businesses.

Last year, BitMEX founder and former CEO Arthur Hayes weighed in, saying that Hong Kong’s appeal to cryptocurrency startups will be determined by its ability to reach Chinese consumers.

Recently, Nikkei Asia revealed that several Chinese cryptocurrency businesses, including financial firms and banks, are eyeing Hong Kong to allow their customers to trade Bitcoin and Ethereum on authorized exchanges.

Hong Kong is striving to emerge as a leading cryptocurrency hub. Nevertheless, it is plausible that some trading platforms may not pledge their long-term presence.

Bitget, a crypto exchange with $1.4 trillion in reserve assets, said on April 24 that it would stop providing services to its Hong Kong clients when the Hong Kong VASP regulation goes into effect on June 1.

However, Paul Chan, Hong Kong’s Financial Secretary, recently reaffirmed the city’s plans to become a crypto hub, saying that despite recent market turbulence, now is the right time for the city to push for Web3.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.