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Officials from the government have affirmed the city’s cryptocurrency initiatives at the Hong Kong Web3 Festival this week, as it seeks to establish itself as a fully regulated crypto center that attracts investments and Web3 startups.
On April 12, Financial Secretary Paul Chan Mo-po emphasized that suitable regulations and oversight are critically important.
“I believe that everyone has learned from recent occurrences that suitable regulations are essential to foster a sustainable development environment and a more favorable space for growth.”
Hong Kong to Regulate DeFi
As per reports, the Hong Kong Securities and Futures Commission (SFC) is also looking to regulate decentralized finance. The agency asserts that DeFi platforms will require a license, which essentially implies they will not be classified as DeFi.
Keith Choy, head of the intermediaries division at the SFC, stated that DeFi should be regarded similarly to CeFi (centralized or traditional finance).
“Therefore, as long as DeFi activities fall within the realm of securities and futures, they will be subject to the same regulatory standards that apply to traditional financial activities.”
Lily King, COO of crypto asset custodian Cobo, remarked that “If Hong Kong genuinely aims to regulate DeFi, this will indicate a more stringent [environment] than Singapore.”
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The new regulations set to take effect in June will mandate that all crypto exchanges in Hong Kong obtain a license from the SFC. However, the licensing process is quite rigorous, with stringent requirements regarding the tokens they are permitted to list.
Nonetheless, local banks are becoming more receptive to crypto, which contrasts with the situation in the West. Earlier this week, Hong Kong’s largest online bank announced it would facilitate transfers and conversions between crypto and fiat currencies.
ZA Bank will serve as a settlement bank for clients, enabling withdrawals in Hong Kong, Chinese, and US currencies from crypto deposits with exchanges, according to CEO Ronald Iu.
Not For Chinese Retail
However, the crypto market in Hong Kong will not be accessible to retail traders from mainland China due to the regime’s restrictions there.
This will create an avenue for Chinese banks, institutions, and corporations to legally engage with crypto markets.
Currently, there are only two fully licensed crypto exchanges in Hong Kong – HashKey and OSL.
OKX president Hong Fang expressed optimism, stating, “It’s a very fluid situation, but I can envision Hong Kong becoming a significant hub for our team, alongside the US and several other offices.”
OKX revealed plans to enhance its presence in Hong Kong by applying for virtual asset licenses in late March.
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