US Crypto Crack Boosts Hong Kong’s DeFi Ambitions – WSJ Report – Cryptopolitan
According to a WSJ report, Hong Kong’s efforts to attract crypto companies are being helped by a growing onslaught from US regulators. In recent years, the US government has taken a more aggressive stance in regulating the crypto industry, with increased scrutiny of the use of digital assets for illegal activities and a crackdown on unregistered securities offerings.
As a result, some crypto businesses have been forced to consider moving to more favorable jurisdictions. Hong Kong is one such jurisdiction that has emerged as a potential destination for these companies. The city has long been a hub for finance and technology in Asia, and in recent years has sought to position itself as a center for cryptocurrency and blockchain innovation.
Hong Kong’s crypto sector is seeing a surge
The road to global crypto dominance for Hong Kong has not been easy. The city was once home to several prominent businesses, including Crypto.com, BitMEX and the bankrupt FTX. However, as a result of increased competition from Singapore, concerns about China’s strict crypto policies, and Hong Kong’s prolonged and severe response to Covid-19, a significant number of firms exited the industry.
Unlike the US, Hong Kong is now committed to reintroducing some of this activity. In recent weeks, U.S. regulators have cut off access to crypto products and services, targeted crypto-friendly banks, brought civil charges against celebrities who allegedly promoted digital assets, and sued exchanges, including Binance Holdings Ltd., the operator of the largest crypto exchange.
Global crypto dominance plans for Hong Kong are underway. According to reports, Hong Kong’s Securities and Futures Commission proposed a new licensing framework centered on investor protection in February. Furthermore, a senior official stated at a press conference that the regulator wanted to avoid a repeat of the problems that brought FTX down and other misconduct.
Krypto units plan to set up shop in HK
More than 20 crypto and blockchain firms from mainland China, Europe, Canada and Singapore have informed the government of their intention to set up shop in Hong Kong. At the same time, according to official figures, over 80 firms have expressed interest in conducting crypto business in the city.
Bybit, a Dubai-based cryptocurrency exchange, stated that it is establishing its Asian core operations in Hong Kong. It intends to locate part of its marketing and research and development teams in the city. The exchange, established in 2018, intends to apply for a license in Hong Kong under the proposed rules that will come into force in June.
Other businesses have questioned the profitability of operating in Hong Kong and the costs of obtaining and maintaining licenses. Some consider the city’s proposed regulations for centralized exchanges and retail trade overly conservative. While the Securities and Exchange Commission finalizes its rules, others are waiting to see if exchanges can serve only the small market of local residents.
According to partner Joy Lou, LD Capital, a crypto investment fund founded in Shanghai and now based in Singapore, plans to move its headquarters to Hong Kong this year, attracted by its financial market infrastructure, more sophisticated secondary market and talent pool. . According to her, the fund is working with recruiters in Hong Kong to hire traders and investor relations and compliance professionals at the local level.
What is the future of crypto in Hong Kong?
In 2021, China’s government cracked down on crypto-related activities, including crypto trading. Previously, the country was a major market for bitcoin mining. China ranked fourth on the Global Crypto Adoption Index in 2020, according to blockchain data platform Chainalysis. Now Hong Kong has to fill the void left by China.
In this context, the US crypto crash has inadvertently boosted HK’s crypto ambitions, as businesses and investors seek a more welcoming regulatory environment and a gateway to the burgeoning Asian crypto market. As a result, HK has the potential to emerge as a leading player in the global crypto and blockchain ecosystem, with implications for the broader economic and technological landscape for years to come.
