Hong Kong’s crypto-friendly efforts are accompanied by stringent regulations for service providers in the digital asset space. The Hong Kong Monetary Authority (HKMA) is developing a new licensing system for virtual asset service providers and guidelines for banks dealing with crypto firms, ensuring that the city doesn’t become a hub for lax regulation.
Tightening regulations for digital assets
Eddie Yue, the Chief Executive of HKMA, has clarified that although Hong Kong is working to establish itself as a major center for digital asset businesses, the city will not offer “light-touch” regulation. According to Yue, strict regulations will coexist with the growing crypto ecosystem in Hong Kong.
Starting June 1, Hong Kong will implement a new licensing regime for virtual asset service providers, allowing retail investors to trade major cryptocurrencies such as bitcoin and ether. This move is part of the city’s efforts to re-establish itself as a leading financial hub following the Covid pandemic and political turmoil.
Beijing supports Hong Kong’s digital asset growth
Despite the Chinese mainland’s strict stance on cryptocurrency-related activities, there are indications that Beijing is supporting Hong Kong’s push to become a significant hub for digital assets. State-owned Chinese banks are reportedly prepared to serve crypto companies in the city.
Yue revealed during the Bloomberg Wealth Asia Summit that further guidance for providing banking services to clients in the crypto sector is under development. As the crypto market experiences tightening regulations worldwide, Hong Kong is working to balance fostering growth and preventing risks.
Hong Kong’s regulatory framework aims to maintain a “reasonable and sustainable level” of control over the digital asset market, preventing events similar to the FTX market crash. According to Yue, the new crypto rules will bring transparency and clarity to the city’s growing digital asset industry.
