Hong Kong’s central banking institution has made it clear that crypto companies enticed by the city’s attempt to establish itself as a hotspot for digital-asset business will not operate under very lax regulations. In an interview on Tuesday, Chief Executive of the Hong Kong Monetary Authority (HKMA) Eddie Yue elaborated:
“Our regulation will be strict. We will be able to create an eco-system here, which is exciting. But that doesn’t mean light-touch regulation.”
On June 1, Hong Kong will introduce a new licensing system for virtual asset service providers. In a report, it is cited Yue’s statements. The plan is to also allow retail investors the ability to buy and trade major crypto currencies like bitcoin and Ether.
The crypto-friendly move is part and parcel of the efforts made by authorities of the Chinese special administrative region to restore Hong Kong’s credentials as a leading financial center in the aftermath of restrictions imposed in response to the Covid pandemics in the region and political unrest.
While no change has occurred in China’s official policy regarding crypto-related activities, which remain heavily restricted in the mainland, there have been indications that Hong Kong’s push to become a major hub for digital assets has the backing of Beijing. A report in late March stated Chinese banks are prepared to provide services for crypto companies in the City. Further guidance for clients of the banking sector to provide services is being developed.
Regulations for the industry have been tightening around the world following last year’s market crash and the collapse of major players such as FTX, a leading cryptocurrency exchange. Hong Kong seems to be moving in the other direction.
The city’s crypto guardrails have been reduced to a “reasonable and sustainable level”, but they won’t allow the recurrence of any FTX-type event in the city, Yue emphasized. Hong Kong’s legislative framework introducing the new crypto rules will bring transparency and clarity, Yue insisted.
Do you think Hong Kong’s new regulations will be favorable enough to attract a significant number of crypto companies to the region? Share your thoughts in the comments below.