The Hong Kong authorities is pushing ahead a legislative proposal to ban retail buyers 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 trade insiders say will trigger Hong Kong to lose competitiveness within the crypto area.
The legislative proposal, launched by Hong Kong’s Monetary Companies and Treasury Bureau in November final 12 months, just lately accomplished a three-month session with the trade and members of the general public. The proposal will now flip right into a invoice and presumably grow to be legislation later this 12 months.
The proposed legislation would require digital belongings companies suppliers — together with crypto exchanges, custody companies suppliers and digital belongings financing companies — to use for a license from the Securities and Futures Fee (SFC). It additionally would require all digital belongings service suppliers who wish to apply for the SFC license ought to serve “skilled buyers solely.”
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Business insiders say that the proposed restrictions on crypto buying and selling, if it turns into legislation, may make firms and fintech expertise lose curiosity in Hong Kong and transfer to extra crypto regulation-friendly shores.
“The trade remains to be in its early stage of improvement and regulators ought to permit extra open area for innovation and entrepreneurship,” mentioned Flex Yang, CEO at Babel Finance, a Hong Kong-based crypto asset administration agency, advised Forkast.Information. “Limiting crypto buying and selling alternatives solely to skilled buyers dangers shedding market competitiveness for Hong Kong compared to different markets such because the U.S., U.Ok. and particularly Singapore.”
World Digital Finance (GDF), a not-for-profit trade affiliation with over 300 members, together with Coinbase, EY and the London Inventory Change Group, warned in a letter that the proposed regulation may inhibit innovation and hinder the competitiveness of the Hong Kong monetary market within the digital belongings enterprise. The trade affiliation additionally asserts the limitation to skilled buyers goes past the Monetary Motion Activity Power (FATF) suggestions and will enhance the chance of cash laundering, as retail buyers may 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 could “empower the SFC to resolve the necessities of licensing situations of digital belongings service suppliers.” One of many necessities included “skilled buyers 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 find the money for to qualify as “skilled buyers” and the remaining 93% can be banned from buying and selling crypto underneath the proposed rule, according to the South China Morning Post.
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“We will definitely think about making use of for a license.” Lennix Lai, director of monetary markets of cryptocurrency trade OKEx, advised Forkast.Information. “This could positively be helpful given the elevated participation of institutional buyers within the area.”
However the SFC ought to think about permitting retail buyers to commerce as effectively, as cryptocurrency can democratize investing and supply inclusive financing to on a regular basis individuals, Lai mentioned. “In spite of everything, cryptocurrency is the most well liked different asset proper now and shouldn’t be completely accessible to the rich.”