The regulatory bodies are to formulate a mandatory licensing program for platforms where digital assets shall be traded by March 2023.
On Monday, Hong Kong set forth a master plan to climb up the global cryptocurrency status ladder through an attempt to legalize retail trading of digital-asset Exchange Traded Funds (ETF). This proposal stood against the city’s previous policy of limiting crypto assets to professional traders. Adding to this pitfall, Mainland China has had a blanket ban on such services since September 2021 due to its own digital currency, the ‘e-CNY’. Cryptocurrencies have existed in somewhat of a grey area in Hong Kong since 2018. However, the backlash faced on account of subdued innovation and the loss of startups to Singapore and Dubai markets has led the government of Hong Kong to ‘reconsider’ their former extended policy.
The regulatory bodies are to formulate a mandatory licensing program for platforms where digital assets shall be traded by March 2023. Presently, access to crypto exchanges is limited to investors with portfolios of at least HK$ 8 million (US$ 1 million). The consultation shall explore the chances of offering EFTs in the nation.
“The Securities and Futures Commission will be conducting a public consultation on how retail investors may be given a suitable degree of access to VA (Virtual Assets), and Hong Kong will be open to the possibility of having EFTs on VA in our market,” the government statement said on Monday.
The city is also openly inviting crypto exchanges from all over the world to explore opportunities to burnish its position as a crypto hub. The Securities and Futures Commission Regulators (SFC) are looking forward to allowing the listings of bitcoin and some other digital currencies, but the city is adamant about not endorsing any particular asset.
The SFC has provided detailed criteria on virtual asset futures exchange-traded funds through a circular shooting a greenlight to listing VAs. Listing timetables or details are unknown as of now, but it is presumptuous that the listing requirements shall be based on market values, liquidity and membership in third part crypto indexes.
The GDP of Hong Kong has subdued to 4.5% in the third quarter ending September 2022. Officials are trying to undo years of impairment caused by political agitation and aftershocks of covid-19 on the financial markets that undermined the city’s claim to fame as the financial party zone of Asia. The government is hence to provide the steps for climbing the fame ladder at a fintech conference in the forthcoming Monday.
There is a hypothesis that retail trading of crypto-assets is just a new dawn in Hong Kong’s digital community, with tokens and other financial instruments coming next. There is also a possibility of enabling exchange-traded funds to offer indirect access to digital assets for institutions and individuals with high net worth.
Property rights for tokenized assets are also at the possible forefront auxiliary to smart contracts, which are self-executing transactions that give results based on pre-programmed data inputs. This could pave the way to security token offerings (STO), tokens representing ownership interests or entitlement holders to income or dividends generated from tangible assets. Adrian Cheng, CEO of Hong Kong real estate giant New World Development, said, “We believe recent progressive policies not only have laid a solid regulatory foundation in Hong Kong but also propelled the birth of a world-leading digital issuance hub of global securities, which is unprecedented in other countries.”
Crypto EFTs stand popular among retail investors allowing them to cut back the complications that are hailed with investing in crypto by traditional investors.
Hong Kong has slipped to fourth place in the Top Five Global Financial Centres Index. The Hang Seng Index has contracted almost 35% this year. Crypto exchange FTX’s CEO Sam Bankman-Fried mentions that it is “obviously not too late” for Hong Kong to try to catch up and even take the lead in virtual-asset regulation.” While the central bank of rival nation Singapore discourages and restricts retail transactions after facing a massive crypto disruption, Hong Kong’s journey to retail investment could, in all effect, be a gamble the investors are willing to endure.