Hong Kong extends a warm welcome to crypto industry in contract with clampdowns...

Hong Kong extends a warm welcome to crypto industry in contract with clampdowns elsewhere

Hong Kong extends a warm welcome to crypto industry in contract with clampdowns elsewhere

Aron Chen

posted on 8 hours agoEditor : Boyuan Wang

Hong Kong has introduced legislation to promote and adopt cryptocurrencies, in contrast to the cautious approach taken by numerous Western countries.

Hong Kong has introduced legislation to promote and adopt cryptocurrencies, in contrast to the cautious approach taken by numerous Western countries.

Major banks, including HSBC and Standard Chartered, have reportedly come under pressure from the Hong Kong Monetary Authority (HKMA), the region's central bank and regulator, to accept cryptocurrency exchanges as clients.

In a May meeting, the HKMA reportedly asked the U.K.-based companies and the Bank of China why they weren't accepting cryptocurrency exchanges as clients. The Financial Times, citing three persons familiar with the situation, reported this on June 15.

The HKMA released a document to banking institutions in April asking them to be aware of recent market developments and to take a more ambitious approach to the cryptocurrency industry.

Contrary to a challenging regulatory landscape for cryptocurrency exchanges in the United States, Hong Kong has emerged as a jurisdiction displaying positive sentiment towards crypto. Notably, on June 5, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Binance, accusing the exchange of violating domestic securities laws. Subsequently, on June 6, the SEC also filed a similar lawsuit against Coinbase, alleging similar violations.

Some Hong Kong lawmakers seem more open to working with cryptocurrency companies.

Johnny Ng, a member of the Hong Kong Legislative Council, backed the troubled cryptocurrency exchange Coinbase on Twitter on June 10 and even made an invitation for it to start doing business in a more welcoming environment.

Hong Kong adopted a definite pro-crypto posture in 2023. Hong Kong's Financial Secretary Paul Chan stated that the local government and regulators are looking forward to creating a crypto and fintech ecosystem in January 2023, as the cryptocurrency industry is still reeling from the FTX crisis.

In mid-February, rumors circulated that some Chinese officials may have given their assent to Hong Kong's pro-crypto initiatives. Local business owners claimed that the Chinese government might be willing to consider Hong Kong as a potential testing ground for cryptocurrencies as long as it does not threaten the country's overall financial stability.

Crypto exchanges Huobi and Gate.io had submitted applications for virtual asset licensing. On May 31, Huobi joined the Hong Kong Virtual Assets Consortium as its first member.

Additionally, many Hong Kong-based crypto firms have received interest from Chinese banks.

Chinese banks such as Shanghai Pudong Development Bank, the Bank of Communications, and the Bank of China have proactively engaged with cryptocurrency enterprises in Hong Kong. They have either begun offering banking services to these organizations or directly approached them to extend their services. This indicates a growing recognition and willingness among banks to cater to the needs of the cryptocurrency sector in Hong Kong.

Hong Kong acknowledges the growing demand for cryptocurrencies as a legitimate asset class. By establishing a robust regulatory framework that ensures investor protection and market integrity, the government seeks to attract both domestic and international investors, fostering a conducive environment for cryptocurrency exchanges and related businesses to flourish.

"Since 2022, Hong Kong has witnessed three waves of development in the Web3 field." On June 10th, Leung Hon-king, the Financial Services and Fintech Division director at InvestHK stated this while attending a Web3 closed-door conference.

He pointed out that the first wave occurred in the fourth quarter of 2022, and residents were very excited, while people from other regions remained skeptical. The second wave began at the beginning of this year when Chinese people from around the world, including mainland investors, came to Hong Kong to interact with regulatory authorities. "The most surprising thing is the third wave, where many foreigners are also coming to Hong Kong." Leung Hon-king mentioned that there had been ongoing exchanges between American practitioners or founders and regulatory authorities over the past one or two months.

Web3 development is thriving, with common applications including cryptocurrencies, decentralized exchanges, DID identity verification, decentralized financial services (DeFi), blockchain games, and NFTs, among others. Leung Hon-king stated that the Hong Kong government sees asset tokenization as a multi-trillion-dollar business opportunity, and blockchain trading platforms can accelerate liquidity flow and reduce listing thresholds, making it an enormous market.

However, this does not mean that Hong Kong's development in Web3 has been smooth sailing. Over the past few years, Hong Kong has faced challenges in terms of talent and capital outflow, influenced by the impact of the pandemic. According to Hong Kong's Census and Statistics Department, the city's labor force has decreased by approximately 190,000 in the past three years.

Some experts from mainland China also pointed out that the current policy regarding the entry of Web3 talents into Hong Kong remains uncertain, and many professionals can only stay in Hong Kong for seven days. He described the enthusiasm for Web3 in Hong Kong as a "surge in April, but now it has cooled down a bit and is not as hot as before, showing a changing trend."

Leung Hon-king believes that simply issuing visas is not the sole solution to this problem. He emphasizes the need to build an ecosystem and consider supporting measures. He is also engaging in discussions with real estate developers to explore options such as finding more affordable office spaces. Additionally, considering that Web3 industry talents may have other lifestyle or educational needs if they start families, Leung Hon-king is currently in contact with private enterprises to establish partnerships to provide better services for the talents brought to Hong Kong.