Crypto Exchanges Embrace Hong Kong’s New Regulations
Taking effect this Thursday, for the first time, Hong Kong introduces a set of regulations to all crypto exchanges with the aim of safeguarding investors from risky practices. These new retail-friendly rules for crypto exchanges are about to take action in a one-year transition period.
Hong Kong is actively competing with global regulators in establishing comprehensive guidelines for the cryptocurrency industry following the notable failures of trading platforms like FTX and the crack down of the sector in 2022. Crypto trading has been allowed in Hong Kong but has been unregulated until now, leading many individual investors to turn to unlicensed platforms.
The new regulations emphasize the necessity for protective measures for crypto investors, requiring crypto exchanges to conduct client evaluations, limit risk exposure, and restrict ‘large-cap' tokens, like bitcoin.
‘(The sector) fundamentally is going to stay despite all the risks… These activities have to be allowed in a regulated way,' – stated Christopher Hui (the city's financial services and treasury chief).
The security regulator of Hong Kong revealed that a great number of applications for a license have already been received, and there is a positive response to the new regime of the market.
They also stated they hope to get things done quickly and start issuing the first licenses soon.
The large crypto exchange OKX will apply for a license, stating they are ‘committed to the Hong Kong market'. However, certain crypto exchanges are skeptic and have encountered difficulties in completing all the requirements for gaining a license, such as accessing traditional banking services and recruiting mandatory corporate specialists.
Furthermore, Hong Kong's market may not be as appealing because of the prohibition of stablecoins, crypto derivatives, and staking products, which restricts retail investors to spot trading.
‘Financial bandwagons' – commented one of the investors in Hong Kong.
‘There's no reason why (the government) should encourage people to bet on someone else paying more for something that has no fundamental value' said former investment banker David Webb.
Only last year, HK$1.7 billion was lost to crypto-related scams and the new rules would help to bring that number down significantly. Hong Kong definitely demonstrates its commitment to taking better advantage of the potential of blockchain systems and limiting harmful practices.
