Hong Kong Embraces Crypto to Rebuild Its Reputation as a Fintech Hub
Hong Kong, which aims to rebuild its reputation as a fintech hub and level the playing field with Singapore, may allow retail investors to trade cryptocurrencies and crypto exchange-traded funds. The government has issued a policy statement on virtual assets that stands in contrast to mainland China’s regressive rules on crypto.
Important takeaways
- Hong Kong’s Securities and Futures Commission has issued a circular setting out requirements for entities considering a public offering of an exchange-traded fund (ETF).
- The regulator will initially allow trading related to Bitcoin and Ether.
- There is a concern among crypto experts that Chinese influence could cause this decision to be overturned at any time.
Financial regulators allow limited trading in futures
Hong Kong’s Securities and Futures Commission (SFC) issued a circular on October 31 setting out requirements for entities considering a public offering of an exchange-traded fund (ETF). It said that in addition to previous regulatory compliance requirements for mutual funds and unit trusts, management companies in Hong Kong would be required to have a good record of regulatory compliance and three years’ experience in managing ETFs.
The regulator indicated that it would follow in the Chicago Mercantile Exchange’s footsteps by initially allowing only ETFs linked to Bitcoin and Ether futures to be listed. It will also hold a public hearing on how to give retail investors access to digital assets.
Move receives mixed reactions
One of Asia’s leading exchange groups, HKEX, welcomed this by tweeting that it would support the growth of Hong Kong as Asia’s premier ETF marketplace. The founder of crypto exchange FTX, Sam Bankman-Fried who moved out of Hong Kong to the Bahamas in 2021, said the city could emerge as a web3, blockchain and cryptocurrency hub.
Although some have welcomed the move, others are concerned that it may not be implemented. Former BitMEX CEO Arthur Hayes recently wrote an essay on Hong Kong’s crypto movement, saying that China may undo positive crypto policies.
The bottom line
Many crypto-related companies, such as cryptocurrency exchange FTX, left Hong Kong as a result of China’s crackdown on crypto. The latest policy aims to go in a different direction than China and open the doors to crypto firms. The bill to create statutory licensing requirements for virtual asset providers will pass through Hong Kong’s legislature and is expected to come into effect in March next year.
