The Central Bank of Hong Kong is sending a message to crypto-based companies drawn to the city while it works to become a hub for these types of businesses and that message is to expect strict regulations.
In a recent interview, Eddie Yue, Hong Kong Monetary Authority’s Chief Executive stated:
“Our regulation will be tight. We will let them create the ecosystem here and that actually brings a lot of excitement. But that doesn’t mean light-touch regulation.”
According to a Bloomberg report, as of June 1st, Hong Kong will have a new licensing regime in place for providers of virtual asset-related services. As a part of this plan, retail investors will be allowed to buy and sell some of the leading cryptocurrencies, such as Bitcoin and Ether.
The step is part of a larger plan by officials within China’s special administrative region to once again have Hong Kong be viewed as a leader in the financial sector following setbacks brought on by the COVID-19 pandemic and political strife in the area.
Even though there haven’t been any changes made to China’s policy pertaining to cryptocurrencies, which in the mainland continue to be extremely strict, there are some indications that Beijing does support Hong Kong’s move to become a global digital assets hub.
A recent report showed that Chines banks that are owned by the state are prepared to provide financial services to crypto-related businesses. Additional guidance for clients in need of banking services within the sector continues to be in the development stage, Yue stated while speaking at Bloomberg’s Wealth Asia Summit.
Industry regulations have continued to become tighter in many areas after the crypto market crashed last year. The collapse of exchanges such as FTX has also played a role in more rigid laws pertaining to cryptocurrencies. The United States, for example, has been going after crypto-based businesses via a series of enforcement actions and legal filings. Hong Kong, on the other hand, has been moving entirely in a different direction.
According to Yue, Hong Kong’s “crypto guardrails” have been very tight over the past few years, but these have now been brought down to a more “reasonable and sustainable level.” Even so, the city has no plans to allow any type of event similar to the FTX debacle. In order to prevent this, the city is introducing new rules that will provide transparency and clarity, explained Yue.