BigONE Insights: Hong Kong Being A Crypto Hub
In very recent news, Hong Kong has rolled out the red carpet for crypto businesses in October 2022 to help revitalize the dying financial hub. There are now indications that the push has under-the-radar Beijing support, providing impetus for mainland Chinese firms to return. The city announced a new crypto initiative on Monday, allowing retail investors to trade digital tokens such as Bitcoin and Ether. Individual investors would be permitted to trade larger coins on exchanges licensed by the Securities and Futures Commission if safeguards such as knowledge tests, risk profiles, and reasonable limits on allowable exposure are in place, according to the regulator in a consultation paper.
On February 22, Hong Kong’s Financial Secretary Paul Chan also unveiled the city’s 2023 Budget. Chan emphasized the significance of web3 and the opportunities it could provide in his speech. “The third generation Internet (Web3), which is currently in its early stages, has the same enormous potential. “We must stay current and seize this golden opportunity to lead innovation development,” he said. In the same speech, Chan announced a 50 million Hong Kong dollar ($6.37 million) investment in the development of a Web3 hub at Hong Kong’s creative digital community Cyberport. OKG Technology Holdings Ltd., a digital-asset firm, increased by up to 22% in Hong Kong. New Huo Technology Holdings Ltd., a cryptocurrency platform operator, increased by up to 14%. Shenzhen Forms Syntron Information Co., a software specialist in mainland China, once added 10%.
Hayes, a prominent cryptocurrency investor explained that Hong Kong would be a litmus test for Beijing’s crypto efforts, as well as a hub for Chinese capital to flow into global markets. “Beijing allows Hong Kong to exist in this manner because it benefits from controlled openness. Hong Kong, as we all know, is now a part of China. “Hong Kong has no real economy other than being a gateway to China, with some slack around the edges,” Hayes wrote on his blog.
The Hong Kong proposal requires all centralized virtual currency exchanges operating in the city or marketing services to investors in the territory to obtain licenses from the securities and futures authority. The requirements “cover key areas such as asset safe custody, know-your-client, conflicts of interest, cybersecurity, accounting and auditing, risk management, anti-money laundering/counter-financing of terrorism, and market misconduct,” according to the announcement. “Aside from ensuring suitability in client onboarding and token admission, the other key proposals concern token due diligence, governance, and disclosures.”
The regulatory requirements are open for public comment until March 31, and the new licensing regime will go into effect on June 1.
BigONE believes this is a positive step for the future of cryptocurrency, with mainland China and Hong Kong having played an important role in the development of the cryptocurrency sector prior to the ban in 2021, which had a negative impact on the market. Seasoned investors such as GCR and Cameron Winklevoss have made references to Asia being the catalyst for the next bull run, and it remains to be seen whether this is a sign of the bull market returning.
