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A high-ranking Hong Kong official has warned crypto exchanges to expect strict regulation and advises those in opposition to go elsewhere.
Hong Kong has stated that its upcoming crypto regulation would not promote a light-touch approach despite the city’s crypto-friendly disposition. The Chinese special administrative region is putting the finishing touches to digital asset licensing rules as it seeks to become a global crypto hub.
Speaking at Tuesday’s Bloomberg Wealth Asia Summit, Hong Kong Monetary Authority CEO Eddie Yue Wai-man warned:
“Our regulations will be tight.”
Yue added that crypto players opposed to the new licensing regime could go elsewhere.
The HKMA chief executive’s comments come just weeks ahead of Hong Kong effecting new regulation and licensing rules for crypto exchanges. The city has joined a growing number of governments worldwide that embrace the crypto industry despite last year’s meltdowns. Hong Kong, in particular, has re-emerged as an enticing crypto destination compared to mainland China which remains largely conservative to digital assets. Last October, the Chinese special administrative city announced plans to become a global virtual asset center.
Pursuant to this agenda, Hong Kong will embark on its licensing regime on June 1st. Despite Hong Kong’s intent to “let the [crypto] industry develop and innovate,” government officials set to wield oversight in this industry say rules will be tight. According to Eddie Yue, they “will let them create the ecosystem here, and that actually brings a lot of excitement. But that doesn’t mean light-touch regulation.”
Hong Kong Previously Proposed Crypto Regulation to Leverage Digital Asset Adoption & Induce Growth
In February, Hong Kong’s Securities and Futures Commission (SFC) proposed new rules governing retail participation in crypto trading. The securities watchdog suggested allowing retail investors to buy tokens, such as Bitcoin (BTC) and Ether (ETH), on licensed virtual asset platforms. According to the SFC, such permissible conditions would place Hong Kong at the forefront of financial advancement. Furthermore, the SFC opined that supporting digital currencies with large market capitalizations would jumpstart the city’s emerging economy.
The SFC is preparing the crypto regulatory framework, which includes guidelines for banks dealing with crypto customers. These rules call for mandatory regulatory licensing of all centralized digital asset trading platforms in Hong Kong. Furthermore, the rules also require that crypto exchanges that market their services to Hong Kong investors have to secure regulatory licensing. In addition, Eddie Yue said Hong Kong’s government entity would soon reveal the extent to which individual investors could participate.
The HKMA is also readying a mandatory licensing regime that would cover stablecoin-related activities next year. Currently, written rules require the value of backing reserve assets to always equal outstanding token value.
Eddie Yue commented on Hong Kong’s comprehensive airtight regulatory framework for all types of digital assets, saying:
“What we want to do in Hong Kong is to say that, hey, this trend will continue. Let’s put in the right regulatory framework using the principle of the same activity, same risk, and same regulation.”
Furthermore, the HKMA CEO believes that the crypto legislative framework would bring transparency and clarity to the sector.