The Hong Kong authorities is pushing ahead a legislative proposal to ban retail traders 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 business insiders say will trigger Hong Kong to lose competitiveness within the crypto house.
The legislative proposal, launched by Hong Kong’s Monetary Companies and Treasury Bureau in November final yr, not too long ago accomplished a three-month session with the business and members of the general public. The proposal will now flip right into a invoice and probably change into legislation later this yr.
The proposed legislation would require digital belongings providers suppliers — together with crypto exchanges, custody providers suppliers and digital belongings financing providers — 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 traders solely.”
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Business insiders say that the proposed restrictions on crypto buying and selling, if it turns into legislation, might make corporations and fintech expertise lose curiosity in Hong Kong and transfer to extra crypto regulation-friendly shores.
“The business continues to be in its early stage of growth and regulators ought to enable extra open house for innovation and entrepreneurship,” mentioned Flex Yang, CEO at Babel Finance, a Hong Kong-based crypto asset administration agency, instructed Forkast.Information. “Limiting crypto buying and selling alternatives solely to skilled traders dangers shedding market competitiveness for Hong Kong compared to different markets such because the U.S., U.Ok. and particularly Singapore.”
International Digital Finance (GDF), a not-for-profit business affiliation with over 300 members, together with Coinbase, EY and the London Inventory Trade Group, warned in a letter that the proposed regulation might inhibit innovation and hinder the competitiveness of the Hong Kong monetary market within the digital belongings enterprise. The business affiliation additionally asserts the limitation to skilled traders goes past the Monetary Motion Activity Drive (FATF) suggestions and will improve the danger of cash laundering, as retail traders might swap to unregulated exchanges.
However Hong Kong’s Monetary Companies 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 might “empower the SFC to determine the necessities of licensing circumstances of digital belongings service suppliers.” One of many necessities included “skilled traders solely” on the preliminary stage. It additional states, “the SFC will proceed to observe 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 have the funds for to qualify as “skilled traders” 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 contemplate making use of for a license.” Lennix Lai, director of economic markets of cryptocurrency trade OKEx, instructed Forkast.Information. “This may undoubtedly be helpful given the elevated participation of institutional traders within the house.”
However the SFC ought to contemplate permitting retail traders to commerce as nicely, as cryptocurrency can democratize investing and supply inclusive financing to on a regular basis folks, Lai mentioned. “In any case, cryptocurrency is the most well liked various asset proper now and shouldn’t be solely accessible to the rich.”