Hong Kong is on the verge of announcing new regulations that will permit retail investors to trade cryptocurrencies, as it strives to establish itself as a leading financial center in the digital asset space.
The Securities and Futures Commission (SFC) of Hong Kong is expected to unveil the details of its consultation on retail participation during a briefing scheduled for Tuesday. Under the proposed plan, individual investors will be able to trade major tokens like Bitcoin and Ether, starting from next month, subject to appropriate safeguards.
The introduction of a licensing framework for virtual-asset platforms on June 1 is part of Hong Kong’s broader effort to regain its reputation as an innovative financial hub. However, the embrace of cryptocurrencies remains contentious following the market downturn in 2022, which triggered a wave of global bankruptcies, including the collapse of the FTX exchange.
Lennix Lai, the chief commercial officer at OKX, a prominent crypto exchange, anticipates that the conclusions drawn from the consultation will reflect the digital-asset community’s perspective, emphasizing the importance of secure, compliant, and safe retail trading in fostering a robust virtual asset ecosystem.
Recent developments in Malaysia and the Philippines have highlighted the ongoing conflicts between regulators and the crypto industry in the region. Malaysia reprimanded Huobi Global, a crypto exchange platform, for operating “illegally” and ordered it to cease activities within the country. However, a spokesperson from Huobi stated that the exchange had not been active in Malaysia since 2022. Meanwhile, the Philippines raised concerns about a derivatives trading venue established by Gemini Trust Co., alleging that it lacks the necessary permits in the country. Gemini declined to comment on the matter.
In its consultation paper released in February, Hong Kong outlined a plan to permit individual investors to trade larger cryptocurrencies on SFC-licensed exchanges. The regulator intends to implement safeguards such as knowledge assessments, risk profiling, and reasonable exposure limits.
The consultation paper further stipulated that the cryptocurrencies eligible for trading should be included in at least two acceptable and investible indexes provided by independent entities. Additionally, one of these indexes should have relevant experience in the traditional financial sector.
Globally, regulators face significant challenges in regulating the crypto industry. Jurisdictions like Hong Kong and Dubai are actively seeking to attract crypto-related investments, while Singapore plans to impose restrictions on retail investor participation. South Korea is expected to pass its first independent crypto legislation this week following a series of scandals, and the United States has intensified its crackdown on the sector.
Uncertainties persist regarding Hong Kong’s shift towards cryptocurrencies, especially considering that the industry has experienced setbacks and only partially recovered from the $1.5 trillion market crash in the previous year. Despite this, crypto firms such as Huobi Global, OKX, and Amber Group have expressed their intentions to apply for licenses under the new regulatory framework.
Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, has signaled that companies should prepare for stringent regulatory oversight in this evolving landscape.
“We will let them create the ecosystem here and that actually brings a lot of excitement,” Yue said earlier this month in an interview at the Bloomberg Wealth Asia Summit.
“But that doesn’t mean light-touch regulation.”