In a push towards reclaiming its place because the world’s crypto hub, Hong Kong has outlined plans to permit retail traders to commerce sure digital currencies on licensed exchanges.
On Monday, Hong Kong’s Securities and Futures Fee (SFC) revealed a session paper on its proposed regulatory regime for crypto buying and selling platforms. The brand new guidelines are set to return into impact beginning in June and would require all crypto platforms to be licensed by the SFC.
The regulator additionally mentioned that retail traders can be allowed to commerce sure “large-cap tokens” on licensed exchanges, on condition that safeguards comparable to data checks, danger profiles, and cheap limits on publicity are put in place.
The company didn’t specify which large-cap tokens can be allowed. Nonetheless, a report by the FT claimed Bitcoin and Ethereum, the 2 largest cryptocurrencies by market cap, can be opened as much as retail clients.
The SFC additionally put ahead standards for which cryptocurrencies can be accessible for buying and selling. Exchanges can be chargeable for vetting the staff behind a token, advertising supplies, and authorized dangers, and discovering out “how resistant it (the token’s community) is to widespread assaults.” Moreover, the token ought to have a comparatively giant market capitalization.
The company outlined large-cap digital property as tokens “that are included in at the least two ‘acceptable indices’ issued by at the least two impartial index suppliers,” one among which ought to have expertise within the conventional monetary sector.
It’s value noting that crypto exchanges are required to not retailer greater than 2% of their consumer property in “sizzling wallets,” which is a sort of pockets that’s accessible on-line. That’s as a result of these wallets are extra susceptible to hacks or phishing scams.
Hong Kong Modifications Stance as Crypto Panorama Improves
The SFC first launched its crypto regulatory framework again in 2018, which banned retail traders from buying and selling crypto. Nonetheless, the SFC mentioned that the “digital asset panorama has modified considerably” because it first introduced the regulatory regime.
Notably, the Hong Kong authorities has already allowed retail traders entry to exchange-traded funds (ETFs) investing in CME Group (CME) Bitcoin and Ether futures.
Moreover, Hong Kong raised $102 million value of digital inexperienced bonds earlier this month. The sale marked the primary tokenized inexperienced bond issued by a authorities, projecting the federal government’s forward-looking stance on blockchain and DLT.
However, Hong Kong’s transfer is a stark distinction to mainland China the place all sorts of crypto-related transactions are banned. With the town’s introduction of a extra crypto-friendly regulatory setting, a number of the Chinese language-founded Web3 firms in exile would possibly flip to Hong Kong to take pleasure in inexpensive Chinese language tech expertise.
Hong Kong, as soon as the world’s crypto hub, began to lose its place in mid-2022 amid rising concern concerning the metropolis’s regulatory ambiguity on crypto and the emergence of potential rivals like Singapore and Dubai which are thought-about extra pleasant to the crypto business.
“There was a time limit the place Hong Kong had a number one place in cryptocurrency and enterprise associated to crypto,” Padraig Walsh, a companion on the Hong Kong legislation agency Tanner De Witt, mentioned again in September. “That is not the case anymore, and I feel regulation has been a key a part of the explanation why.”