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Hong Kong’s Web3 regulation was not intended to discourage digital assets, says SFC chief

Hong Kong's Web3 regulation was not intended to discourage digital assets, SFC chief

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TL;DR

  • The collapse of FTX led to regulatory action in Hong Kong, with the CEO of the SFC incorporating virtual asset service providers into the financial framework to establish a transparent and protective regulatory environment.
  • Hong Kong introduced a licensing system allowing retail investors to participate in the digital asset market, emphasizing the importance of cryptocurrency trading and openness to related technologies.

The collapse of the FTX served as a wake-up call for regulators in Hong Kong. Julia Leung Fung-yee, CEO of the Securities and Futures Commission (SFC), initiated a rapid response to the crisis by incorporating virtual asset service providers into the existing financial, legislative framework​.

During a recent speech, while addressing Hong Kong’s embrace of web3 regulation, Leung noted that the FTX bankruptcy significantly impacted jurisdictions that had previously been open to cryptocurrencies. She emphasized that the SFC’s response was not intended to discourage digital assets but to establish a transparent and predictable regulatory environment that promotes investor protection and manages risk for financial institutions​.

A new chapter in virtual asset regulation

The SFC introduced a licensing system regulating all public interaction with virtual assets. Until recently, trading in digital assets was limited to professional investors with substantial financial assets. The new scheme has broadened this, allowing retail investors to participate in the digital asset market​.

Leung emphasized the importance of cryptocurrency trading within the virtual asset ecosystem and expressed openness to the application of related technologies, such as bond tokenization and investment funds. Despite the turbulent market conditions, she acknowledged that the development of a robust virtual asset ecosystem is a long-term project​.

A distinct approach from mainland China

Leung also highlighted the contrast between Hong Kong’s stance and the cryptocurrency ban in mainland China, pointing out that the new licensing system exemplifies the “one country, two systems” policy. This approach has positioned Hong Kong as a distinct and welcoming environment for crypto businesses.

The local government has set up the Cyberport, a digital hub aimed at promoting innovation. This initiative has attracted over 150 Web3 firms in the past year, aided by a government investment of 50 million yuan ($7 million) to accelerate the development of Web3​.

The evolving regulatory framework in Hong Kong represents an adaptive response to the rapid changes in the virtual asset market. As the virtual asset fintech community continues to grow in the region, Hong Kong’s role in this emerging field is likely to become increasingly significant​.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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Damilola Lawrence

Damilola is a crypto enthusiast, content writer, and journalist. When he is not writing, he spends most of his time reading and keeping tabs on exciting projects in the blockchain space. He also studies the ramifications of Web3 and blockchain development to have a stake in the future economy.

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