The Hong Kong authorities is pushing ahead a legislative proposal to ban retail buyers from buying and selling crypto and require all digital property 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 12 months, just lately accomplished a three-month session with the business and members of the general public. The proposal will now flip right into a invoice and presumably develop into regulation later this 12 months.
The proposed regulation would require digital property providers suppliers — together with crypto exchanges, custody providers suppliers and digital property financing providers — to use for a license from the Securities and Futures Fee (SFC). It additionally would require all digital property service suppliers who need 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 regulation, may 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 permit extra open house for innovation and entrepreneurship,” mentioned Flex Yang, CEO at Babel Finance, a Hong Kong-based crypto asset administration agency, informed 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 business affiliation with over 300 members, together with Coinbase, EY and the London Inventory Trade 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 property enterprise. The business affiliation additionally asserts the limitation to skilled buyers goes past the Monetary Motion Job Pressure (FATF) suggestions and will improve the chance of cash laundering, as retail buyers may change 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 will “empower the SFC to resolve the necessities of licensing situations of digital property 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 come up with the money for to qualify as “skilled buyers” 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 take into account making use of for a license.” Lennix Lai, director of monetary markets of cryptocurrency change OKEx, informed Forkast.Information. “This could undoubtedly be useful given the elevated participation of institutional buyers within the house.”
However the SFC ought to take into account permitting retail buyers to commerce as nicely, as cryptocurrency can democratize investing and supply inclusive financing to on a regular basis folks, Lai mentioned. “In spite of everything, cryptocurrency is the most well liked different asset proper now and shouldn’t be solely accessible to the rich.”