The city-state of Hong Kong is looking to once again open up to the crypto industry. The regulator of the small nation will allow retail investors to trade in major cryptocurrencies such as Bitcoin and Ether, provided that the transactions take place through a registered platform.
The Securities and Futures Commission (SFC) of Hong Kong has published a regulatory proposal for crypto trading platforms this week. The regulatory body aims to establish a framework for the licensing of cryptocurrency service providers and is also soliciting input on whether licensed platforms should serve retail investors. Is China re-entering the crypto industry?
Hong Kong wants to allow retail crypto trading
The requirements proposed by the SFC for crypto trading platforms are said to be comparable to those for licensed securities brokers and automated trading venues. The framework would allow retail investors to once again invest in select cryptocurrencies, a privilege that was previously exclusive to professional investors. The city-state's change in direction was hinted at last fall.
"As has been our philosophy since 2018, our proposed requirements for virtual asset trading platforms include robust measures to protect investors, following the ‘same business, same risks, same rules’ principle. In light of the recent turmoil and the collapse of some leading crypto trading platforms around the world, there is clear consensus among regulators globally for regulation in the virtual asset space." Hongkongs Securities and Futures Commission in einer Stellungnahme
This move is part of a larger effort by Hong Kong to re-establish itself as a financial center. The binding regulatory framework aims to attract foreign crypto firms while also protecting investors, provided that protective measures such as knowledge tests, risk profiles, and appropriate exposure limits are introduced. The consultation phase is set to take place in March, with trading for retail investors scheduled to begin on June 1st.
Subtle push by China?
According to an anonymous source cited by Bloomberg, there are indications that Hong Kong's foray into the world of cryptocurrencies is being covertly supported by Beijing, which could facilitate the return of Chinese companies to the city. Representatives from the Chinese liaison office and other officials have reportedly attended the city's crypto gatherings frequently in recent months, exchanging business cards and WeChat contact details.
Local crypto operators believe that their presence dispels any doubts about Beijing's stance on Hong Kong's pursuit of becoming a crypto hub. The discreet support is seen as a sign of the authorities' interest in using the laissez-faire city as a testing ground for cryptocurrencies, while the mainland government maintains strict controls on such activities.