No, Hong Kong will not allow retail traders access to crypto on June 1st
Hong Kong is warming up to crypto, with a licensing regime for Virtual Asset Service Providers (VASP) – the local term for crypto exchanges – starting on June 1.
Does this mean that crypto will be “fully legal” then in the city for everyone, as a tweet suggests? Not at all.
While the situation may change later, the VASP framework for licensing exchanges, which has just concluded a multi-year consultation, only allows them to grant access to accredited professional investors. Private investors are excluded.
The Hong Kong government has indicated that the Securities and Futures Commission (SFC), its securities regulator, may consider retail access to virtual asset services in the future, following further consultation.
In January, Reuters reported that the SFC is considering which cryptocurrencies to offer to retail investors should the door eventually be opened to them. CEO Julia Leung is quoted as saying that only “highly liquid” assets will be on the list, and the choices will be very limited to begin with.
The city’s authorities see June 1 as an opportunity, saying that “Brand Hong Kong” is much more highly regarded around the world than, say, the Seychelles or St. Kitts and Nevis. The regulator is expanding the number of employees to handle an expected amount of license applications.
“We are able to pool investment globally,” Christopher Hui, secretary of the Financial Services and the Treasury (FSTB), said in an earlier interview with CoinDesk. “We can manage and also channel these investments in a well-regulated and also sustainable way.”
Hong Kong’s credibility comes from its “laws, regulation, commercial modus operandi,” Hui said, and this translates well from traditional finance to crypto.
However, others in Hong Kong see things differently.
“For those platforms operated outside of Hong Kong, we see little incentive to incorporate in Hong Kong, set up an office here, go through the strict licensing requirements, as the local market is small,” Leo Weese, co-founder of the Bitcoin Association of Hong Kong , wrote in a 2021 post. “Local institutional investors will be able to interact with foreign platforms through their foreign subsidiaries.”
Still, he is optimistic that the new regulations “can restore clarity and stability after years of uncertainty,” Weese said in an interview. “It is important that individuals get the easy access to bitcoin they have become accustomed to over the last 12 years.”
These individuals, the retail investors, are sure to be excited about the opportunity to use a local Hong Kong entity to trade. After all, there is no capital gains tax in Hong Kong, and Japan shows what happens when retail investors are able to trade in a regulated environment. After FTX, Japanese traders seem to be living in a parallel world, where their tokens were stored with a depository and funds are returned.
But it’s not quite the retail investors’ turn yet in Hong Kong. It is still a work in progress.
