Hong Kong SFC Chief emphasizes crypto trading’s crucial role in the virtual asset ecosystem, while the city urges banks to engage with crypto clients and fosters a favorable regulatory environment.
Julia Leung Fung-yee, the CEO of the Securities and Futures Commission (SFC) in Hong Kong, emphasizes the importance of cryptocurrency trading in the virtual asset ecosystem.
In a recent speech, Leung emphasized that Hong Kong acknowledges the importance of crypto trading and embraces the utilization of related technologies in financial services, such as bond tokenization and investment funds.
She also emphasized the role of Web3 regulation in facilitating the development of the virtual asset ecosystem following the collapse of FTX, a cryptocurrency exchange, in November 2022.
Regulatory Measures To Safeguard Investors And Foster Innovation In Hong Kong
Leung explained that the implementation of a new licensing system for virtual asset providers aims to safeguard investors while considering the risks faced by financial institutions. According to her, incorporating virtual asset providers into the regulatory framework is necessary to foster innovation and enhance market trust, especially in the aftermath of FTX’s bankruptcy.
After the FTX incident, Hong Kong took measures to mitigate regulatory risks associated with centralized exchanges. In December 2022, the legislative council included virtual asset service providers in the same legislation that governs traditional financial institutions. Additionally, the city’s financial regulator introduced a new regulatory framework for cryptocurrencies on June 1st.
The new regulations introduce stringent Anti-Money Laundering guidelines and investor protection laws for digital asset exchanges seeking to establish operations in Hong Kong.
Moreover, retail investors now have the opportunity to trade virtual assets, as the restrictions that previously limited digital asset trading to professional investors and traders with a minimum of $1 million in bankable assets have been lifted.
Hong Kong Urges Banks to Engage with Crypto Clients
In recent weeks, the Hong Kong Monetary Authority (HKMA) has raised inquiries to banks such as HSBC, Standard Chartered, and Bank of China regarding their reluctance to accept crypto exchanges as clients.
The HKMA advised the banks that conducting due diligence on potential crypto customers should not impose excessive burdens, especially for those establishing offices in Hong Kong to explore opportunities in the industry. This initiative aligns with Hong Kong’s renewed aspiration to regain its status as a leading hub for the crypto industry.
As a demonstration of support, the government allocated 50 million yuan ($7 million) in February to accelerate the progress of Web3 development. These efforts have proven fruitful, as an increasing number of crypto companies are relocating to the city-state to take advantage of its favorable regulatory environment.
Just last week, Hong Kong’s Financial Secretary Paul Chan Mo-po, announced that over the past year, more than 150 Web3 firms have established operations in Cyberport, a technology hub managed by a government-owned subsidiary in the Hong Kong Special Administrative Region. In total, Cyberport hosts 1,900 enterprises, according to Chan.