The Hong Kong authorities is pushing ahead a legislative proposal to ban retail buyers from buying and selling crypto and require all digital belongings buying and selling platforms to acquire licenses to function within the territory — a prospect that crypto trade insiders say will trigger Hong Kong to lose competitiveness within the crypto house.
The legislative proposal, launched by Hong Kong’s Monetary Providers and Treasury Bureau in November final 12 months, just lately accomplished a three-month session with the trade and members of the general public. The proposal will now flip right into a invoice and presumably turn into regulation later this 12 months.
The proposed regulation would require digital belongings companies suppliers — together with crypto exchanges, custody companies suppliers and digital belongings financing companies — to use for a license from the Securities and Futures Fee (SFC). It additionally would require all digital belongings service suppliers who need to apply for the SFC license ought to serve “skilled buyers solely.”
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Trade insiders say that the proposed restrictions on crypto buying and selling, if it turns into regulation, may make corporations and fintech expertise lose curiosity in Hong Kong and transfer to extra crypto regulation-friendly shores.
“The trade continues to be in its early stage of growth and regulators ought to enable extra open house for innovation and entrepreneurship,” stated Flex Yang, CEO at Babel Finance, a Hong Kong-based crypto asset administration agency, advised Forkast.Information. “Limiting crypto buying and selling alternatives solely to skilled buyers dangers dropping market competitiveness for Hong Kong compared to different markets such because the U.S., U.Ok. and specifically Singapore.”
International Digital Finance (GDF), a not-for-profit trade affiliation with over 300 members, together with Coinbase, EY and the London Inventory Alternate Group, warned in a letter that the proposed regulation may inhibit innovation and hinder the competitiveness of the Hong Kong monetary market within the digital belongings enterprise. The trade affiliation additionally asserts the limitation to skilled buyers goes past the Monetary Motion Process Power (FATF) suggestions and will improve the danger of cash laundering, as retail buyers may swap to unregulated exchanges.
However Hong Kong’s Monetary Providers and the Treasury Bureau disagrees with that evaluation. The bureau says that it’s a member of the FATF — the inter-governmental physique that units worldwide requirements for combating cash laundering and terrorist financing — and that it developed the proposal in accordance with the FATF’s suggestions.
The proposed rule states that it could “empower the SFC to determine the necessities of licensing situations of digital belongings service suppliers.” One of many necessities included “skilled buyers solely” on the preliminary stage. It additional states, “the SFC will proceed to watch the market and rethink its place because the market turns into extra mature in future”.
Knowledgeable investor means a person or company having a portfolio of not lower than 8 million HKD, or about US$1.03 million. However solely about 7% of the territory’s inhabitants would come up with the money for to qualify as “skilled buyers” and the remaining 93% can be banned from buying and selling crypto below the proposed rule, according to the South China Morning Post.
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“We will definitely take into account making use of for a license.” Lennix Lai, director of monetary markets of cryptocurrency change OKEx, advised Forkast.Information. “This might positively be helpful given the elevated participation of institutional buyers within the house.”
However the SFC ought to take into account permitting retail buyers to commerce as effectively, as cryptocurrency can democratize investing and supply inclusive financing to on a regular basis individuals, Lai stated. “In any case, cryptocurrency is the most popular various asset proper now and shouldn’t be completely out there to the rich.”