Cryptocurrency update

Hong Kong has played a key role in the short history of cryptocurrency. The Chinese territory is the birthplace of some of the world’s largest cryptocurrency companies and the industry’s most groundbreaking inventions, with trillions of dollars in transactions through its local exchanges.

Tether, the world’s largest stablecoin, was launched here.Cryptocurrency groups such as USD 18 billion FTX Trading and blockchain startup Raised $10 billion this yearWith the support of the investors who nurtured Facebook and PayPal, they began to grow rapidly from Hong Kong.

The combination of the magic formula for winning cryptocurrency bragging rights in the region with financial expertise and entrepreneurial spirit has created billionaire tycoons from real estate speculators and plum sauce manufacturers. Most of the largest cryptocurrency exchanges in Hong Kong were founded by people who left their international banking careers.

But what was once a feather in Hong Kong’s ceiling has become a topic that disturbs the city’s financial regulators. The scale of its booming industry is so large that it is increasingly inconsistent with China’s obstruction of cryptocurrency.

currently progressing Beijing’s cryptocurrency crackdown As Hong Kong’s own industry faces an existential crisis, the upcoming regulation threatens to wipe out most of the freedom of entrepreneurship.

Hong Kong outlined a new framework for regulating cryptocurrencies in 2018 and further licensing arrangements for exchanges that had not yet become law last year, reflecting the tough stance taken by regulators in the UK, the US and other parts of Asia. However, its latest proposal will make it one of the strictest in the world.

According to the rules, crypto trading will be limited to professional investors-those with $1 million in liquid assets (excluding digital currencies), and exchanges must obtain licenses in the same way as asset management companies engaged in securities trading.

Currently, the Encryption Group “opt-in” licensing arrangements. Many people have already applied, but so far, only one OSL has been successful and obtained a license in December of last year. No further approvals have increased the uncertainty of when the new rules will take effect, but they have already faced immense opposition, which some fintech groups in the city describe as extreme and outdated.

“Due to uncertainty, every major cryptocurrency company in Hong Kong has launched a contingency plan to relocate their business,” said Henri Arslanian, head of cryptocurrency at consulting group PricewaterhouseCoopers and former chairman of the Hong Kong Fintech Association. Say.

He added that Hong Kong may be “like an academy football club, training these companies before they go to other jurisdictions and reaping rewards”.

The industry is lobbying for rule changes that allow licensed exchanges to sell to retail investors, and is seeking to clarify whether the regulations allow Hong Kong-based crypto companies to provide services to foreign retail investors. Critics say that if they don’t, there is little benefit in operating in locations where office rents are prohibitively high.

Investor protection should be the biggest concern of regulators. However, the new rules may not provide much protection. Retail investment in Hong Kong is complex, so any restrictions may prompt investors to trade cryptocurrencies through offshore exchanges or high-risk peer-to-peer transactions, as seen in mainland China.

Ironically, Hong Kong has one of the most cutting-edge cryptocurrency fund methods in the world. Currently, any licensed fund manager can spend 10% of his portfolio in cryptocurrency without additional licensing conditions. The territory has also been at the global forefront of exploring central bank digital currencies.

But Singapore has Open the door To Asian cryptocurrency groups and vigorously promote them Encryption freedom As a viable alternative for international companies to enter the Asian market.

Cryptocurrency exchanges and transactions are legal in this city-state, and it has attracted some of the largest players in the industry, such as Changpeng Zhao, The founder of Binance, and Cameron and Tyler Winklevoss, who established the Gemini Exchange’s Asian base there.

Hong Kong groups, including OSL, have begun to quickly develop business in the country, and more than 300 companies have applied for cryptocurrency trading and payment licenses to their currency authorities.

For most large cryptocurrency groups, Singapore is unlikely to be the first choice, but Hong Kong’s growing unease is increasing its appeal. Its early victory seems to prove the benefits of regulatory clarity; something Hong Kong waits nervously.

Tabby Kinder is an Asian financial reporter for the Financial Times

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