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Hong Kong Prepares for Crypto Retail Trading

According to a report, authorities in Hong Kong may allow larger retail investors to trade crypto – opening up more opportunities for the trade of digital assets.

While Hong Kong is preparing to be a major crypto trading hub, many businesses are in the midst of seeking advice to prepare for the territory’s newest crypto licensing requirements to be able to serve retail traders. The bill was recently passed in December.

At writing, Hong Kong’s financial services providers, including fund managers and brokers, are in the works of preparing and seeking advice to legally provide crypto services to retail traders. Currently, only those in the professional investor class with at least $1 million in bankable assets are eligible to trade crypto.

The new VASP licensing regime

In early December 2022, Hong Kong’s Legislative Council passed an amendment to the Anti-Money Laundering and Counter-Terrorist Financing Bill. The bill contains a licensing regime for virtual asset service providers (VASP) to conduct business legally in the territory, and can open up opportunities for crypto businesses to open its doors to retail traders. The bill will come into force on June 1, 2023.

Upon effect, VASPs must obtain a licence from the Securities and Futures Commission, must  pass local anti-money laundering and counter-terrorist financing scans, and other regulatory requirements such as investor protection, including “safe custody of client assets.”

A new crypto era for Hong Kong

Back in October, Hong Kong announced its strategic policies in repositioning itself as a digital assets and investment hub.

To bring reassurance to regulators, Julia Leung has been appointed chief executive of Hong Kong’s Securities and Futures Commission (SFC) since the new year, and has previously called for stricter crypto regulation.

“As the SFC enters its third decade, the Commission will redouble its effort to continue delivering as a world-class market regulator,” said Leung. The SFC will “strive to ensure that Hong Kong’s regulatory framework and market infrastructure are fit” to help the city’s financial market thrive amid increasing connectivity with the world.  

Johnny Ng, a member of Hong Kong’s Legislative Council and a member of China’s advisory body, the Chinese People’s Political Consultative Conference, recently suggested that Hong Kong should establish rating agencies for virtual assets, and start the development of a central bank digital currency (CBDC).

“The stablecoins on the market now are issued by private companies and are not subject to government regulation, and many worry about related risks,” Ng highlighted, emphasising that Hong Kong should consider creating a stablecoin-inspired CBDC, suggesting that a e-HKD issuance with decentralised finance (DeFi) can potentially address risks associated with Web3 and virtual assets.

Hong Kong’s central bank, the Hong Kong Monetary Authority said in September that a wholesale system-level e-HKD can take up to three years to develop.

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