As the U.S. government continues to rein in the crypto industry with a spate of regulations, other places are emerging as new hubs for the virtual asset industry. On Monday, Hong Kong proposed rules that would let retail investors trade certain “large-cap tokens” on licensed exchanges, a stark contrast to mainland China across its border where crypto-related transactions are outright banned.
According to some insights, China is about to approve a behind-the-scenes plan of making Hong Kong a new crypto hub.
The first news about pushing the development of the blockchain ecosystem was revealed by Hong Kong authorities earlier in October. It was stated that Chinas administrative region will legalize cryptocurrency operations for retail traders.
As the rumors goes, Hong Kong has already worked out specific crypto legislation that is supposed to come into action by the end of this year. Additionally, the Security and Futures Commission initiated public consultations on the potential requirements for those platforms that will operate virtual asset trading. As for the new licensing regime, it is scheduled to be enacted in June 2023.
Chinas Response
Investors are still uncertain how China will react and respond to these developments. The answer unexpectedly arrived this Tuesday. According to the Bloomberg report, Beijing authorities have already provided the behind-the-scenes approval for developing the Hong Kong crypto ecosystem together with blockchain aspirations.
Rumors say different Chinas officials including Liaison Office representatives have been regularly attending crypto gatherings that took place in Hong Kong over the last months. They actively took part in networking sessions by swapping WeChat details and business cards. The officials established a friendly approach to cooperating with businesses by monitoring their current developments, examining reports, making follow-up calls, etc.
Crypto Testing Ground
Hong Kong, historically a financial hub, can potentially be a laboratory for China‘s policymakers to test out blockchain’s potential with some buffer for the nations one billion netizens.
Some say the presence of the officials is a sign of the initiative from Beijing to turn Hong Kong into a crypto testing ground. While operations with digital assets will develop in the city, China will still keep a tight grip on coin-related operations and activities on the mainland.
The proposal laid out by Hong Kong stipulates that all centralized virtual currency exchanges operating in the city or marketing services to the territorys investors must obtain licenses from the securities and futures authority. As a result, more and more crypto firms are pushing to register in Chinese businesses. They include not only in-house but also overseas companies. We might see the revolutionary cryptocurrency comeback after an industry ban input 15 months ago. It forced many businesses to leave the country and act abroad.
With Hong Kongs introduction of a more relaxed regulatory environment for cryptocurrencies, some of these Chinese-founded web3 companies in exile might return and be closer to home.
China‘s clampdown on crypto trading to protect individual investors from speculative activity seems prescient now, given the flurry of bankruptcies and layoffs that has roiled the global crypto industry. But money and talent continue pouring into web3 despite the burst of the crypto bubble. It’s hard to imagine Beijing sitting still while the rest of the world works on the building blocks that some argue would spark a new wave of innovation as big as the current internet itself.
As stated earlier, the new licensing regime will come into force on June 1, 2023. It will oblige all crypto investors and market participants to obtain licenses established by SFC. New requirements will be based on the current SFC regulations. Whats more, they will be much similar to those followed by automated trading platforms and security brokers.
Leave a Reply