Hong Kong’s Chief Executive Officer of the Monetary Authority, Eddie Yue, has announced that the city is open to cryptocurrency companies, but they will abide by its stringent regulations. Yue made these comments while speaking at Bloomberg Wealth Asia Summit on May 9, 2023.
China and Hong Kong is known for their strict regulatory framework on cryptocurrencies and blockchain technologies, but Yue stated that the regulations had been reduced to a “reasonable and sustainable” level to attract cryptocurrency businesses. He noted a new regulatory framework will be implemented to ensure the stability and integrity of the country’s financial system, and the authorities will be vigilant against potential risks posed by the cryptocurrency industry.
Under the new regulatory framework, licenses will be granted to platforms that deal with digital assets. Tokens eligible for trading in Hong Kong will undergo rigorous scrutiny, including background checks on issuers and developers. Also, cryptocurrency exchanges will need full insurance coverage to protect against risks and potential losses, and market-making activities will not be permitted.
The authorities aim to allow retail investors to trade significant crypto assets, but traders from mainland China will not have access due to Beijing’s ban on cryptocurrencies. The regulatory framework will provide guidance to banks on how to handle clients involved in cryptocurrencies, and a stablecoin licensing requirement is expected to be introduced next year.
Hong Kong’s decision to release a new regulatory framework is motivated by its desire to become a hub for Web3, Decentralized Finance, and blockchain technologies. The Securities and Futures Commission (SFC) expected to release its findings on the extent of retail investor participation in the crypto market ahead of the launch of the new crypto regulations on June 1, 2023.
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