Julia Leung Fung-yee, CEO of the Securities and Futures Commission (SFC) of Hong Kong, recently highlighted the importance of cryptocurrency trading in the virtual asset ecosystem during a speech. She also welcomed the application of related technologies such as bond tokenization and investment funds.
Leung was referring to the collapse of the crypto exchange FTX in November 2022, which prompted Hong Kong to embrace Web3 regulation and strengthen market trust. As a result, the city-state introduced a licensing system for virtual asset providers to protect investors and address the risks faced by financial institutions.
In December 2022, virtual asset service providers were included in the same legislation governing traditional financial institutions. On June 1, the financial regulator implemented a new framework to reduce regulatory risks associated with centralized exchanges. The rules included Anti-Money Laundering guidelines and investor protection laws for digital asset exchanges looking to open a business in Hong Kong. Additionally, it allowed retail investors to trade virtual assets, as opposed to restricting it to professional investors and traders with at least $1 million in bankable assets.
The Hong Kong Monetary Authority (HKMA) recently pressured banks such as HSBC, Standard Chartered, and Bank of China to accept crypto exchanges as clients. The HKMA stated that due diligence should not “create undue burden” for those setting up an office in Hong Kong. This comes as Hong Kong has allocated 50 million yuan ($7 million) to speed up the development of Web3.
According to Hong Kong’s Financial Secretary Paul Chan Mo-po, more than 150 Web3 firms have established operations in the city’s Cyberport over the past 12 months. Cyberport, which is managed by a wholly-owned subsidiary of the government of Hong Kong Special Administrative Region, hosts a total of 1,900 enterprises.
