What’s behind Hong Kong’s approach to crypto? Kaiko dives in
Hong Kong’s Securities and Futures Commission (SFC) has taken a new approach to the crypto industry. This new way of regulating the nascent sector could benefit the crypto market and bring a new wave of capital to the largest digital assets in the ecosystem.
On Monday, Hong Kong clarified its intentions to open the door to crypto trading in the Asian region in what appears to be a completely different approach to the enforcement actions taken by the US Securities and Exchange Commission (SEC).
Provider of market data for digital assets Kaiko weighed in on the matter in a recent blog post, suggesting that Asia looks set to position itself at the forefront of the next digital asset revolution by welcoming crypto businesses. Kaiko research analyst Conor Ryder said:
A tantalizing East could well be the next catalyst driving crypto prices higher, with some proclaiming that this race has already begun, fueled by an Asian-linked token rally.
Why the sudden crypto-friendly policy from Hong Kong?
Why, after a turbulent year, low prices and debacles from exchanges and firms such as FTX, is Hong Kong and possibly other jurisdictions loosening regulatory policy in the region? Kaiko analyst Conor Ryder suggests that given the “carpet bomb” from the SEC, now is the perfect time for Hong Kong to strike.
The influx of new capital into Hong Kong and Asia could mean economic growth for the region and Asian stock exchanges. Data compiled by Kaiko shows that Asian exchanges benefited the most from the bull run in 2021. However, since China banned digital assets in late 2021, Asia has lagged significantly behind other regions when looking at Binance’s trading volume.
Under the SFC’s proposal, they will allow trading of the “largest cap virtual assets” included in at least two approved indices.
The perpetual futures markets reacted positively to the realization that the listed tokens could see renewed flows from Asia, with open interest in Bitcoin Cash, Litecoin and Polkadot rising 15% last week, according to Kaiko Research. Funding rates also moved positively and have largely stayed up since the announcement.
The announcement of a new regulatory approach from Hong Kong, with alleged support from China, can be seen as positive for crypto in the long term. Meanwhile, the market is still deciding which way prices will go, for a continuation of the crypto winter or another bull market. Conor Ryder concluded:
The timing of the announcement, while the SEC is cracking down on crypto, looks intentional and may actually drive crypto business out of the US and towards Asia over time.
The total market cap at the time of writing is $1.02 trillion, representing a -3.13% decline in the last 24 hours. Bitcoin’s market cap is $449 billion, with a dominance of 40.33%.
The stablecoin’s market capitalization is $137 billion and has a share of 12.29% of the total market capitalization, according to CoinGecko data.
Featured image from Unsplash, chart from TradingView.
