At the Hong Kong Web3 Festival this week, government officials confirmed the city’s dedication to being a fully regulated crypto hub, attracting investment and Web3 startups. Financial Secretary Paul Chan Mo-po emphasized the importance of proper regulations and oversight on April 12.
“I believe that everybody has learned from recent events that appropriate regulations are a must to create a sustainable development environment and a more ideal space for development.”
Hong Kong to Regulate DeFi
The Hong Kong Securities and Futures Commission (SFC) also plans to regulate decentralized finance, stating that DeFi platforms will need a license, essentially making them non-DeFi. The head of the SFC’s intermediaries division, Keith Choy, believes that DeFi should be treated the same as centralized or traditional finance, subject to the same regulatory requirements if it involves securities and futures.
“As such, as long as DeFi activity holds within the scope of securities and futures, it would be subject to the same regulatory requirements applicable to traditional financial activity.”
Crypto asset custodian Cobo’s COO, Lily King, remarked that Hong Kong’s intention to regulate DeFi would make for a stricter environment than Singapore. The new regulations, effective in June, mandate that all crypto exchanges in Hong Kong be licensed by the SFC. However, the licensing process is stringent, with stringent requirements for the tokens they list.
Despite this, regional banks in Hong Kong are welcoming cryptocurrency, which is not the case in the West. Hong Kong’s biggest online bank recently announced that it would be offering transfers and conversions to and from crypto and fiat currencies, with ZA Bank acting as a settlement bank and enabling withdrawals in Hong Kong, Chinese, and US currencies.
Not for Chinese Retail
Hong Kong’s crypto market won’t be accessible to mainland Chinese retail traders because of local restrictions. However, it provides a legal entry into cryptocurrency markets for Chinese banks, institutions, and corporations. Currently, only two crypto exchanges, HashKey and OSL, are fully licensed in Hong Kong. Hong Fang, President of OKX, stated that Hong Kong, along with the United States and other offices, would be a vital hub for their team.
In late March, OKX announced plans to expand its presence in Hong Kong by seeking virtual asset licenses.