Hong Kong and Singapore Battle It out to Be Asia’s Crypto Capital

3 mins
Updated by Ryan Boltman
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In Brief

  • Singapore and Hong Kong are both major international crypto hubs.
  • Financial authorities in the two cities have diverged on their approach to retail crypto investing.
  • Elsewhere in Asia, Japan has forged its own regulatory path.
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Hong Kong and Singapore are two of Asia’s leading crypto hubs. And in recent years, many international crypto firms have found a home in both cities. 

For example, the multi-billion dollar digital asset firm Amber Group is headquartered in Singapore but never forgot its roots in Hong Kong.

In fact, in an interview with Bloomberg, Amber Group’s managing partner Annabelle Huang said the company maintained one of its biggest offices in Hong Kong. It is also preparing to apply for the city’s new virtual asset trading platform (VATP) license.

Discussing the respective scenes in two of Asia’s preeminent crypto hubs, Huang said that “for us the two markets are equally important.” Expanding, she added that “Hong Kong is sort of leading the way at the moment but Singapore is not exactly closing the door.”

Two Crypto Hubs Diverge on Retail Trading Regulation 

Certainly, Singapore and Hong Kong have diverged in their regulatory approaches to crypto assets.

Singapore initially attracted crypto firms with its relaxed licensing regime. But in recent times, the Monetary Authority of Singapore (MAS) has taken a much harder line on trading platforms.

Specifically, the MAS has banned crypto exchanges from marketing or promoting their services to members of the public. It has also issued repeated warnings cautioning retail investors about the volatility of crypto assets.

This year, the MAS has proposed further measures that may restrict retail investors’ access to certain crypto offerings. These would prevent investors from borrowing to fund cryptocurrency purchases. They would also prohibit firms from lending or staking their coins to generate yields.

Yet despite the somewhat paternalistic stance of the financial regulator, interest in crypto remains strong in Singapore.

Meanwhile, with the VATP license, Hong Kong has created a regulatory pathway for crypto exchanges to set up shop. Rather than imposing a blanket ban on any specific activities, the new regime will require exchanges to register with the Securities and Futures Commission (SFC).

Under the previous framework, SFC-licensed platforms could only serve professional investors. However, without creating space for retail crypto trading within regulated entities, people often turn to unregulated platforms.

Rather than a prohibitive approach, the new VATP rules will require retail trading platforms to implement enhanced protective measures. These will include onboarding steps that assess users’ risk profiles and strict token due diligence criteria.

Japan Goes Its Own Way

Sure, Singapore and Hong Kong may attract the most international attention. But away from the major hubs, other Asian markets are cultivating their own crypto scenes.

Last year, Amber Group gained a foothold in Japan via its acquisition of the cryptocurrency exchange DeCurret. 

However, hinting at an intended sale of the unit, Huang said that the retail crypto market was not the company’s strategic priority at the moment. Instead, Amber is focused on serving institutional clients and will likely offload DeCurret to a potential buyer.

That being said, the firm has no intention of abandoning the Japanese market. “Japan is still booming, especially in terms of the different Web3 applications that are coming out of it,” Huang insisted. 

Certainly, Japan has not proven to be an especially profitable market for crypto exchanges and many have struggled to break even. Compared to elsewhere, trading platforms are highly policed. And Japan’s Financial Services Agency (FSA) has enforced strict security and consumer protection rules. 

And while this has created an idiosyncratic regulatory environment in the country, advocates of Japan’s approach point to the case of FTX Japan as proof that the approach works.

FTX customers elsewhere are still coming to terms with the fact that they may never be able to recover their assets. But the platform’s Japanese user base has been able to withdraw all their fiat and crypto funds.

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James Morales
James is a London-based editor, writer and explorer of the cryptosphere who started his journalistic career writing about digital art before honing his craft as a financial technology reporter. From the latest innovation in digital assets to the evolution of Web3, he is perpetually fascinated by the technologies of decentralization.