• Hong Kong is actively promoting Web3 development and regulating the crypto space.
• The government has established a task force to foster growth and innovation in the crypto sector, and the SFC has been issuing licenses to exchanges.
• However, large banks in Hong Kong have been reluctant to engage with crypto clients.
Hong Kong’s Ambitions in Cryptocurrency
Hong Kong is actively working towards becoming a major hub for cryptocurrency, with the Securities and Futures Commission (SFC) granting retail exchange licenses under its new licensing regime. In addition, the city-state has set up a task force dedicated to ethically promoting Web3 projects within its borders. Despite this progress, large banks in Hong Kong remain hesitant about engaging directly with crypto customers.
Support from Government and Industry Participants
Animoca Brands co-founder and executive chairman Yat Siu expects more events, activities, and companies to choose Hong Kong as their Web3 headquarters due to the government’s support of such initiatives. The SFC’s proactive approach and transparent framework have also given licensed exchanges development opportunities that comply with regulations.
Pressure on Banks by HKMA
Despite efforts by regulators, large banks such as HSBC, Standard Chartered, Bank of China are still reluctant to work with cryptocurrency clients due to pressure exerted on them by the Hong Kong Monetary Authority (HKMA). In June 2020, HKMA instructed these banks to carry out appropriate due diligence when dealing with potential customers involved in cryptocurrencies or related activities.
Knowledge Tests for Retail Crypto Exchanges
The new licensing regime requires certain safeguards such as knowledge tests, risk profiles, reasonable exposure limits be put in place before retail investors can trade specific “large-cap tokens” on licensed exchanges. This is intended as a preventative measure against misuse of funds or other criminal activity associated with cryptocurrencies like money laundering or fraud .
Hong Kong is taking steps towards becoming a major player in Web3 while ensuring that proper safety measures are taken for those trading cryptocurrencies within its borders. Although large institutions remain hesitant about engaging directly with customers involved in cryptos or related activities , it appears that regulators are making strides in creating an environment conducive for further growth and innovation within the industry.