Hong Kong to adapt cryptocurrency regulations to growing industry

Hong Kong financial regulators are prepared to adjust their approach to regulating cryptocurrencies as the industry evolves, according to Finance Secretary Christopher Hui.

Speaking at a parliamentary session, Hui said the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) would take market trends into account when developing regulations. He said:

The HKMA and the SFC will monitor market developments and, if necessary, review the requirements for VA-related activities.

Hui’s comments were in response to questions about potentially speeding up the cryptocurrency licensing process and easing the rules for intermediaries distributing crypto assets. He explained that licensed corporations and registered institutions can distribute cryptocurrency-related products after notifying regulators, without having to modify their licensing terms.

The discussion follows the withdrawal of license applications by several major global cryptocurrency exchanges, including OKX, Gate.io, and HTX, ahead of a June 1 deadline set by the SFC. After that date, all cryptocurrency trading platforms operating in Hong Kong must be licensed or “deemed to be licensed” applicants.

The strictness of Hong Kong’s licensing rules has drawn criticism from some quarters. Lawmaker Duncan Chiu has expressed concerns that overly strict rules have discouraged major global exchanges from entering the Hong Kong market. In a recent opinion piece, Chiu argued that these withdrawals have undermined confidence in Hong Kong’s efforts to establish itself as a Web3 hub.

Hong Kong’s Cryptoscape

Hong Kong approved the launch of six spot Bitcoin (BTC) and Ethereum (ETH) exchange-traded funds (ETFs) in early May. The products in question were issued by China Asset Management (ChinaAMC), Bosera Asset Management and Harvest Global Investments and offer exposure to cryptocurrencies without technical knowledge.

Earlier this month, the Banque de France (BDF) and the Hong Kong Monetary Authority also signed a memorandum of understanding on bilateral cooperation on wholesale central bank digital currency and tokenization development, with both regulators ready to explore interoperability between their digital currencies and cross-border transactions.