The CEO’s Address: Embracing Web3 Regulation and Crypto Trading
The CEO of the Securities and Futures Commission (SFC) of Hong Kong, Julia Leung Fung-yee, recently spoke about Hong Kong’s response to the collapse of crypto exchange FTX in November 2022. Leung emphasized the importance of crypto trading as a vital component of the virtual asset ecosystem.
New Licensing System for Virtual Asset Providers
During her speech, Leung explained that the implementation of a new licensing system for virtual asset providers aims to safeguard investors while considering the risks faced by financial institutions. She believes that incorporating virtual asset providers into the regulatory framework is essential to foster innovation and restore market trust following FTX’s bankruptcy.
Reducing Regulatory Risks and Inclusion of Virtual Asset Service Providers
In response to the FTX collapse, Hong Kong took steps to mitigate regulatory risks associated with centralized exchanges. In December 2022, the legislative council included virtual asset service providers within the same legislation that governs traditional financial institutions.
Enhanced Regulations for Digital Asset Exchanges
The new regulations introduce strict Anti-Money Laundering guidelines and investor protection laws for digital asset exchanges seeking to establish operations in Hong Kong. Additionally, a new licensing scheme has been introduced, granting retail investors the ability to trade virtual assets. Previously, digital asset trading was limited to professional investors and traders with at least $1 million in bankable assets.
Hong Kong’s Cryptocurrency Licensing System
According to Leung, Hong Kong’s cryptocurrency licensing system serves as an exemplification of China’s “one country, two systems” policy. While cryptocurrencies have been banned in mainland China since 2021, Hong Kong has taken a different approach by fostering a welcoming environment for the crypto industry.
Growth of Web3 Firms in Hong Kong
Over the past 12 months, more than 150 Web3 firms have established operations in Hong Kong’s Cyberport, a digital hub created by the local government to promote innovation. This surge followed the government’s allocation of 50 million yuan ($7 million) to expedite the development of Web3.
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