Government officials have confirmed the city’s crypto commitments at the Hong Kong Web3 Festival this week as it aims to become a fully regulated crypto hub attracting investment and Web3 startups.
On April 12, Financial Secretary Paul Chan Mo-po reiterated that appropriate regulations and oversight were of paramount importance.
“I believe that everybody has learned from recent events that appropriate regulations are a must to create a sustainable development environment and a more ideal space for development.”
Hong Kong to Regulate DeFi
According to reports, the Hong Kong Securities and Futures Commission (SFC) also wants to regulate decentralized finance. The agency believes DeFi platforms will need a license which essentially means they won’t be DeFi.
Keith Choy, head of the intermediaries division at the SFC, said DeFi should be considered the same as CeFi (centralized or traditional finance).
“As such, as long as DeFi activity holds within the scope of securities and futures, it would be subject to the same regulatory requirements applicable to traditional financial activity.”
Lily King, COO of crypto asset custodian Cobo, commented that “If Hong Kong really intends to regulate DeFi, this will mean it has a stricter [environment] than Singapore.”
The new regulations which come into effect in June will require all crypto exchanges in Hong Kong to be licensed by the SFC. However, the licensing process is very strict, with harsh requirements for the tokens they can list.
Nevertheless, regional banks are opening up to crypto, which cannot be said for the West. Earlier this week, Hong Kong’s largest online bank announced it will be offering transfers and conversions to and from crypto and fiat currencies.
ZA Bank will act as a settlement bank for clients, allowing withdrawals in Hong Kong, Chinese, and US currencies from crypto deposits with exchanges, said CEO Ronald Iu.
Not For Chinese Retail
However, Hong Kong’s crypto market will not be available to mainland Chinese retail traders due to the regime’s restrictions there.
It will provide a pathway for Chinese banks, institutions, and corporations to legally enter crypto markets.
There are currently only two fully licensed crypto exchanges in Hong Kong – HashKey and OSL.
OKX president Hong Fang was optimistic, stating, “It’s a very fluid situation, but I can see Hong Kong being a very important hub for our team, together with the US and some other offices.”
OKX announced plans to expand its presence in Hong Kong by applying for virtual asset licenses in late March.
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