Hong Kong — officially the Hong Kong Special Administrative Region of the People’s Republic of China — is a city of over seven million residents on th
Hong Kong — officially the Hong Kong Special Administrative Region of the People’s Republic of China — is a city of over seven million residents on the eastern Pearl River Delta in South China. The city is known for being pro-innovation and technology, and over the past year, it has introduced legislation to promote and adopt cryptocurrencies.
Hong Kong is a major world economy, serving as a center for investment and trade in the region. The city is a cosmopolitan metropolis with Western and Asian influences, and is a well-established data hub for key businesses in finance, shipping, trade and retail, with crypto becoming the latest addition.
While China has maintained a hardline anti-crypto stance for almost half a decade, last year, Hong Kong introduced its own crypto legislation allowing retail investors to invest directly in crypto assets.
In 2023, as most countries in the West are still cautious about cryptocurrencies, Hong Kong has taken a decidedly pro-crypto stance.
In January, as the crypto industry was reeling from the FTX crisis, Hong Kong’s Financial Secretary Paul Chan said that local government and regulators are looking forward to building a crypto and fintech ecosystem in 2023.
On Jan. 13, just days after Chan’s statement, Korean tech giant Samsung announced the launch of a Bitcoin Futures Active ETF, or exchange-traded fund, on the Stock Exchange of Hong Kong.
In mid-February, sources claimed that some Chinese officials were reportedly giving tacit approval to Hong Kong’s pro-crypto efforts. Local business operators stated that the Chinese government might even be open to using Hong Kong as a test bed for crypto as long as it doesn’t threaten the country’s financial stability.
By March, more than 80 crypto firms expressed interest in opening an office in Hong Kong.
In April, the Hong Kong Monetary Authority (HKMA) — the region’s central banking institution and regulator — called on banks to provide services to cryptocurrency firms. The HKMA asked banking institutions to be attentive to market developments and take a forward-looking approach to the nascent tech sector, including cryptocurrencies.
Global crypto exchanges eye the Hong Kong market
In May, the chair of the FinTech Association of Hong Kong told Cointelegraph that the pro-crypto state would launch a licensing regime for crypto service providers and exchanges with a deadline of June 1, including retail. Later in the month, the Hong Kong Securities and Futures Commission (SFC) announced that licensed crypto platforms would be allowed to serve retail customers.
At the time of writing, crypto exchanges Huobi and Gate.io had applied for virtual asset licenses, with Huobi becoming the first member of the Hong Kong Virtual Assets Consortium on May 31.
On May 29, Huobi opened its retail trading services as the firm submitted its license request to the SFC. A spokesperson from the firm told Cointelegraph that “Hong Kong regulations allow existing virtual assets platforms to operate for an extra year without a license.”
#Huobi HK 现已开始向专业和零售客户提供现货和托管服务。作为一家香港虚拟资产交易平台的先驱，Huobi HK 已于 5 月 29 日正式向香港证监会提交了申请通知书，我们期待能够获得虚拟资产交易所牌照。
在未来六个月内，Huobi HK… pic.twitter.com/qkYSqKbLBH
— 火币Huobi中文频道 (@HuobiGlobalzh) May 29, 2023
Gate.io also announced it was applying for a virtual asset license, as it had already operated as a custodian in Hong Kong since August 2022.
A spokesperson from the exchange told Cointelegraph that Gate.HK will officially file the license application in the second half of 2023.
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The exchange said, “In comparison to other regulators, the SFC has a stricter requirement for virtual asset service providers. It has compulsory insurance/compensation arrangement requirements in place to help protect clients. Further, it has a 98% cold wallet storage requirement that licensed corporations would need to comply with. We believe only the best virtual asset service providers would be able to comply with the financial and operational requirements.”
Binance, the largest global crypto exchange with a significant presence in the Asian market, is currently monitoring developments in Hong Kong. A Binance representative told Cointelegraph that it was actively involved during the “public consultation period and contributed to the policy-making process of virtual asset platform regulation in Hong Kong.”
The crypto exchange said it welcomes more regulatory clarity for the industry and is currently considering its options to best encourage the adoption of cryptocurrencies.
Bitfinex, another prominent global crypto exchange, told Cointelegraph that the developments in Hong Kong’s crypto landscape clearly reflect the constantly evolving nature of the digital…
cointelegraph.com