Hong Kong remains committed to becoming a global cryptocurrency hub in spite of the challenges posed by markets and rivals.
Hong Kong officially unveiled its new approach to cryptocurrencies during its Fintech Week late last year, which highlighted Web3 integration. Shortly thereafter, officials permitted the listing of Hong Kong’s first crypto-based exchange-traded funds, which have since raised over $80 million.
Then, Hong Kong’s Securities and Futures Commission announced that retail investors would be able to trade “highly liquid” digital assets. This development, as well as a mandatory exchange licensing regime, is expected from June this year. Authorities have also scheduled a consultation for this quarter on which assets to allow for retail investors.
Officials have also expressed willingness to review property rights for tokenized assets and the legality behind smart contracts’ execution. Yet, in spite of these efforts, Hong Kong still has its work cut out for it in achieving its crypto ambitions.
Hong Kong Returning to Form
These ambitions represent more of a return to form, as Hong Kong had served as a crypto hub in the earlier years of digital assets. Sam Bankman-Fried’s FTX and Alameda Research have roots in the city, while Binance one retained a base there. However, many firms ultimately decided to leave, due to increasing signs of greater regulation and restriction.
Initially, officials decided to significantly raise regulatory standards, restricting crypto exchange access to those with portfolios of at least HK$8 million ($1 million). Once China largely banned crypto in 2021, the city also lost its appeal as an outlet to the mainland. Repressive coronavirus policies instituted by an increasingly authoritative Beijing also led to a significant brain drain from the city.
However, fears over greater Chinese incursions are just one of the challenges Hong Kong currently faces. As digital asset prices slumped last year, transaction volume in Hong Kong expanded less than 10% in the 12 months through June from a year earlier. It also faces persistent competition from nearby Singapore.
“The value of the reserve assets of a stablecoin arrangement should meet the value of the outstanding stablecoins at all times,” an HKMA report said.
“The reserve assets should be of high quality and high liquidity. Stablecoins that derive their value based on arbitrage or algorithm will not be accepted.”
A longtime rival financial center in Southeast Asia, Singapore has also been vying to become a global cryptocurrency hub. When Hong Kong announced its crypto plans during its Fintech Week last year, Singapore held its own during overlapping dates. The Monetary Authority of Singapore (MAS) also introduced crypto regulation proposals late last year.
One company’s current conundrum makes plain the challenge posed by the choice between the two choices. Based in Singapore, crypto lender Matrixport Technologies is currently awaiting the outcome of a virtual asset license application. However, based on developments it has been observing in Hong Kong, it may decide to move there before its application is resolved.
In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content.