Instead of going down the path followed by mainland China of completely banning crypto activities, Hong Kong is set to develop new cryptocurrency regulations that will affect commercial crypto activities within its borders.
Previously, Hong Kong had been a preferred destination for those seeking to issue initial coin offering among other commercial activities. However, its lenient stand on crypto related activities is making the financial watchdog in Hong Kong to think of providing stringent cryptocurrency regulations to govern the space.
According to Hong Kong’s financial regulator, the Securities and Futures Commission (SFC):
“Investment funds will be required to obtain a license if more than 10% of the assets they manage are made up of Bitcoin or other cryptocurrencies, and will be allowed to sell related products only to professional investors.”
However,the SFC will allow cryptocurrency exchanges to test the impact of the cryptocurrency regulations in regulatory ‘sandbox’ after which they can decide to be licensed.
The new cryptocurrency regulations are to be rolled out in phases. When the cryptocurrency regulations become effective, initial coin offerings will be among the most affected since the tokens will need to be in existence for a minimum of 1 year before being sold to investors.
Daisuke Yasaku, Daiwa Institute of Research notes that:
“As a financial center closely linked to mainland China, Hong Kong is taking steps in the right direction with measures like requiring identity verification for transactions. But the cost of regulations will be high.”
In developing and implementing stringent cryptocurrency regulations, Hong Kong is banking on the idea that these regulations will raise the confidence of crypto investors.
But,as Timothy Loh, a law firm manager in Hong Kong, notes, tighter cryptocurrency regulations may not be welcomed by all operators especially those whose market share will be negatively affected.
What benefits do you think the new cryptocurrency regulations will bring in Hong Kong’s crypto space?
Share your thoughts in the comments section below.
