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Hong Kong is looking to reposition itself as a key crypto hub in the region

Hong Kong is looking to reposition itself as a key crypto hub in the region, reopening trading to retail investors.

This move is significant given its ties to the People’s Republic of China, a country that has been historically anti-crypto.

Experts suggest that the new crypto rules could serve as a playbook for adoption for the PRC, and that China may be using Hong Kong as a testing ground for crypto adoption.

Hong Kong is known for being pro-innovation and technology, and over the past year, it has introduced legislation to promote and adopt cryptocurrencies.

The city is a major world economy, serving as a center for investment and trade in the region,

and is a well-established data hub for key businesses in finance, shipping, trade, and retail, with crypto becoming the latest addition.

The proposal laid out by Hong Kong stipulates that all centralized virtual currency exchanges operating in the city or marketing services to the city must obtain the relevant permits to operate there.

How does HongKong’s pro-crypto stance differ from mainland China’s

Hong Kong’s pro-crypto stance differs from mainland China’s anti-crypto stance in several ways:

  • HongKong is increasingly solidifying its status as a crypto hub in Asia, while China has maintained its anti-crypto stance for a long time, even before banning crypto entirely in September 2021.
  • HongKong is known for being pro-innovation and technology, and over the past year, it has introduced legislation to promote and adopt cryptocurrencies.
  • In contrast, China has effectively banned trading and stamped out crypto-related activities.
  • Hong Kong is a major world economy, serving as a center for investment and trade in the region, and is a well-established data hub for key businesses in finance, shipping, trade, and retail, with crypto becoming the latest addition.
  • China, on the other hand, has not changed its anti-crypto stance in terms of local regulations.
  • Hong Kong is considering allowing retail investors to directly invest in virtual assets, while China has effectively banned trading and stamped out crypto-related activities.
  • HongKong is moving to reassure businesses that the city’s official stance on cryptocurrencies is separate from that of mainland China, and its potential crypto legalizations could serve as a compass for China.
  • However, China has not changed its anti-crypto stance in terms of local regulations.
  • Hong Kong has an on-again-off-again relationship with crypto, while China has maintained its anti-crypto stance for a long time, even before banning crypto entirely in September 2021.

Hong Kong’s New Crypto Rules Explained

Hong Kong has recently implemented new regulations for cryptocurrency trading platforms.

Here are some key points to understand:

  • The new rules will allow licensed virtual asset trading platforms to sell certain large market cap cryptocurrencies, such as Bitcoin and Ether.
  • The Hong Kong Securities and Futures Commission (SFC) will accept license applications for crypto exchanges starting June 1, 2023.
  • Licensed virtual asset providers can serve retail investors, provided that operators assess understanding of the risks involved.
  • Crypto exchanges are required to maintain at least HKD 5,000,000 ($640,000) in capital and submit monthly reports to the SFC.
  • The new rules explicitly ban crypto “gifts” designed to incentivize retail customers to invest, which likely includes airdrops.
  • The court in Hong Kong has acknowledged cryptocurrencies as property that can be held in trust.
  • Before the new regulations, there was no specific legislation directed at regulating cryptocurrency in Hong Kong.
  • The new licensing requirement would initially ban retail investors from trading cryptocurrency, and the new legislation would require cryptocurrency trading platforms to only offer services to “professional investors” until the market becomes “more mature”.

Overall, the new regulations aim to position Hong Kong as a crypto hub while also protecting investors and ensuring compliance with anti-money laundering and counter-terrorist financing regulations.

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