Hong Kong has moved forward with plans to allow private investors to trade cryptocurrencies as it vie with Singapore for supremacy as a digital asset hub.
Under plans launched Monday by the Hong Kong Securities and Futures Commission, the two largest crypto tokens in the industry — bitcoin and ether — would be opened up to retail customers, and licensed exchanges would be required to ensure customers have “sufficient knowledge of virtual assets”. before they can act. All digital asset trading platforms operating in Hong Kong or actively promoting investors in Hong Kong must be licensed by the SFC.
The proposals, which will first be subject to a six-week consultation with “interested parties”, would also require no more than 2 percent of customers’ money to be stored in “hot wallets”, a term used to describe online accounts. that are considered vulnerable to hacks or phishing attacks because their keys are stored online.
Allowing retailers – who have hitherto had to trade crypto assets on unlicensed exchanges – to access licensed platforms would be a major step forward in efforts to attract crypto companies to Hong Kong. The area has been let down in recent years by rival Singapore, which has allowed retail trade, but has been stung by several high-profile crypto controversies, including last year’s collapse of the dollar-pegged token terraUSD.
Singapore-based crypto hedge fund Three Arrows collapsed last June as an international manhunt for Do Kwon – co-founder of the company behind terraUSD – brought the city-state into international limelight.
“This sends a powerful signal that Hong Kong wants to reclaim its status as a global crypto hub,” said Henri Arslanian, managing partner at crypto asset management firm Nine Blocks Capital Management.
“Many major crypto companies have struggled to operate from Hong Kong in recent years, mainly due to Covid travel restrictions. These consultations will add to the renewed momentum the city is seeing,” he added.
The crypto industry is trying to recover after a year marked by plummeting prices, thousands of job losses and a crisis of confidence that led to the collapse of several high-profile companies, including crypto exchange FTX, which was founded in Hong Kong before relocating to the Bahamas.
“In light of the recent turmoil and collapse of some of the leading crypto trading platforms around the world, there is a clear consensus among regulators worldwide for regulation in the virtual asset space to ensure that investors are adequately protected and key risks mitigated effectively. managed,” said SFC chief executive Julia Leung.
Additional reporting by Chan Ho-him
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