Hong Kong doubles down on crypto bet

Written by Kapronasia || November 02 2024

Hong Kong’s financial regulators and at least some in the industry seem to believe that the city’s future as a financial hub depends on its embrace of cryptocurrency. For the past two years, Hong Kong has been relentlessly pitching itself as a digital assets hub in an effort to regain ground lost to Singapore and mainland China. The city-state has emerged as a larger and more important fintech hub, while mainland Chinese stock exchanges are attracting companies to list that might have once chosen to go public in Hong Kong. While it can be argued that Hong Kong would be better served by focusing less on an industry that remains problematic in many respects, its big bet on crypto might end up paying off big.

During the recent Hong Kong Fintech Week, regulators highlighted their plans to further develop the city as a crypto hub. On the one hand, Hong Kong plans to expand tax concessions to include cryptocurrency investments by the end ofhte year. The extension aims to cover privately offered funds and family offices, with the intention of stimulating market development in the region.

Further, Hong Kong plans to issue more licenses to crypto trading platforms in the next few months. Crypto exchanges that have yet to receive full operational licenses in Hong Kong include Crypto.com, Bullish, HKbitEX, PantherTrade, Accumulus, DFX Labs, Bixin.com, EX.IO, YAX, WhaleFin and Matrixport HK. They need to tread carefully because of new legislation (effective June 1) that criminalizes the act of operating an unlicensed virtual asset trading platform (VATP). The SFC has said it would actively pursue companies violating the regulation.

Thus far, just three exchanges, OSL, HashKey and HKVAX, are fully licensed in Hong Kong. Some others have thrown in the towel, likely because of compliance shortcomings. These exchanges include OKX, Bybit and Huobi HK.

Additionally, Hong Kong plans to introduce stablecoin legislation following the launch of a sandbox in March. One of the sandbox’s first projects is a proof-concept pilot involving Standard Chartered, the digital bank Mox Bank, Mastercard and Libera. Completed in May, the project explores the operational and risk management benefits of tokenized deposits to support the settlement of tokenized assets. Other stablecoin issuers admitted into the sandbox include Jingdong Coinlink Technology, RD InnoTech, and a joint venture from Standard Chartered Bank, Animoca Brands, and Hong Kong Telecommunications.

A finalized bill for regulating stablecoins will be submitted to the Legislative Council later this year, according to the HKMA. Regulators also plan to set out separate guidelines to address money laundering risks related to stablecoins.