Hong Kong aims to lead the crypto industry
Hong Kong is unshackling itself from China’s government restrictions on the cryptocurrency sector and encouraging the adoption of blockchain technology with the aim of becoming the global centre of the crypto industry and trading.
Hong Kong, officially the Hong Kong Special Administrative Region of the People’s Republic of China, has a free market economy heavily dependent on international trade and finance. Known for innovation and promotion of new technologies, in recent months it has introduced new regulations to promote and facilitate the adoption of cryptocurrencies.
On 1 June, a new licensing regime for cryptocurrency exchange platforms came into force, opening up access to cryptocurrency trading for retail investors, which was previously prohibited. This will allow these platforms to provide services in a regulated manner in their territory.
More than 80 companies involved in cryptocurrency exchange and blockchain ecosystem development have already made applications to Hong Kong for a presence in the territory. Many of these companies already have businesses in mainland China, but others come from Singapore, the European Union, the United States, Canada, the United Kingdom and other regions of the world.
In addition, the central banks of Hong Kong and the United Arab Emirates have announced that they will coordinate their crypto-asset regulations to facilitate the settlement of cross-border transactions, opening up the possibility of using their own digital currencies (CBDCs). This comes shortly after the administrative region’s monetary authority unveiled the launch of a digital version of the Hong Kong dollar.
Will China change its stance against crypto?
Against the backdrop of the Chinese government’s historically tough restrictions on crypto trading – to the point of declaring all cryptocurrency-related activities illegal – Hong Kong’s new regulatory policy on cryptocurrencies suggests a possible paradigm shift in China’s stance on cryptocurrencies.
Especially considering that Beijing recently published a white paper outlining the way forward for leading Web 3.0 innovation and development that could lay the groundwork for the renaissance of China’s crypto-asset industry.
Meanwhile, the US government, chastened by the collapse of FTX – the world’s third-largest crypto-trading platform at the time – excluded Binance from the banking sector after a regulator’s lawsuit, as it considers implementing more restrictive policies in the cryptocurrency sector. These developments contrast with the position of the Hong Kong government, which is pressuring big banks to accept cryptocurrency platforms as clients.
The possibility of this new regulatory approach becoming a reality prompted Brian Armstrong, chief executive of Coinbase, to warn that the application of more restrictive policies in the US crypto-trading sector benefits China: “Given these moves and China’s strategy of leveraging financial technology to protect its own national interests, it should come as no surprise that Hong Kong is positioning itself as a global cryptocurrency hub”.
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