The abrupt collapse of major crypto exchange FTX has shaken the cryptocurrency markets across the world, but it will not hamper Hong Kong’s plans of establishing itself as a crypto hub, according to the city’s Financial Secretary, Paul Chan.
A recent string of bankruptcies by a number of crypto businesses makes a case for enhanced transparency and tighter regulation within the industry, Chan wrote in a recent blog post, as reported by The South China Morning Post.
“Our policy statement released recently is conducive to building such an environment and has made the industry very hopeful about the development of Hong Kong’s virtual asset market,” according to the senior official who has served as Hong Kong’s financial secretary since 2017.
The prices of nearly all major cryptos crashed last week after FTX filed for Chapter 11 bankruptcy. FTX, at the time, was a top 5 cryptocurrency exchange in terms of trading volume.
Meanwhile, in spite of the claims made by Chan, the latest announcement comes as crypto investors are increasingly worried about Hong Kong’s regulatory ambiguity on digital assets and potentially negative legislative proposals.
The Chinese city’s lawmakers are advancing plans to require licensing for crypto trading platforms through an amendment to Hong Kong’s anti-money laundering legislation. This would require firms to offer such services exclusively to professional investors with a portfolio of at least HK$8 million (US$1 million). Should the legislative proposal go through, the decision could discourage numerous crypto investors from performing their business in Hong Kong.
At the same time, earlier this month, Hong Kong’s top securities regulator suggested it will pursue plans to enable retail investors to access exchange-traded funds (ETFs), which track cryptoasset futures. The Securities and Futures Commission (SFC) has already issued a “consultation paper” that consists of the proposed guidelines and rules for crypto ETFs.
Earlier in 2022, the securities regulator released a joint statement with the city’s central bank, the Hong Kong Monetary Authority. The declaration made reference to providing retail investors with access to a “limited suite” of crypto-based financial products.