There have been calls by entrepreneurs and investors in Hong Kong towards the government, urging it to be supportive of the cryptocurrency industry as the city is on the verge of losing its status as a cryptocurrency hub due to the lack of a clear regulatory framework.
Calls for crypto regulatory clarity in Hong Kong
According to the South China Morning Post, some stakeholders believe that Hong Kong was once a leader in the cryptocurrency industry. However, this is no longer the case, with regulations believed to have played a significant role in the diminishing crypto business in the city.
Some leading web 3.0 & crypto companies were founded in Hong Kong. However, the local community has been uncertain of the city’s stance on cryptocurrencies, which has led to crypto companies migrating to cities such as Dubai and Singapore.
Tough crypto regulations in Hong Kong
Nevertheless, Hong Kong is still pursuing a regulated crypto space. The city plans to amend its anti-money laundering law, where cryptocurrency trading platforms will be mandated to acquire a license. Moreover, it would also require crypto trading platforms to extend their services to professional investors, which are investors with a portfolio of at least $1 million.
In July, a legislative council meeting was held to address the law amendment. During the meeting, the deputy secretary for Hong Kong’s Financial Services and the Treasury Bureau, May Chan, said the administration understood the need to balance regulations and the healthy growth of the digital asset space.
According to Chan, limiting digital asset investments to professional investors was prudent, given that virtual assets were still a new asset class and were accompanied by high-risk levels.
However, limiting digital asset investments to professional investors has been opposed, with some saying that while anti-money laundering and Know-Your-Customer laws were needed, it was not logical that exchanges only offer their services to professional investors.
According to Tanner De Witt’s Walsh, limiting services to professional investors “sets a tone regarding regulatory standards that have disheartened people in the crypto community.”
The move has also been opposed by the founder and managing partner of Token Bay Capital, Lucy Gazmararian, who said that a tough regulatory framework in a fairly new market pushed out businesses to other jurisdictions that were more open to supporting emerging technologies.
According to the executive, Hong Kong needed to position itself as a hub for the Web3 market and provide industry confidence to select Hong Kong as the base of its operations, which would, in turn, create jobs and support investments in the long run term.
Web3 companies have settled in countries with clear or established regulatory frameworks. With Hong Kong lagging in this sector, industry players are committed to restoring the city as a cryptocurrency hub.
Some players in the sector now believe that there are reasons they believe Hong Kong will restore its status as a crypto hub. One of these is the loosening of COVID-19 restrictions that have been enforced for two years. The government also announced it would end mandatory quarantines for foreign travelers, which could attract foreign investments.
The easing of restrictions as a fuel for crypto businesses in the country is expected to improve the short-term sentiment, and it could end up attracting more crypto businesses. However, the regulatory framework will play a major role in determining whether the city will transform into a crypto hub in the long term.
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