Hong Kong reviews ‘overly stringent’ cryptocurrency regulations

Hong Kong is reconsidering cryptocurrency regulation as lawmakers fear the current framework could act as a deterrent to exchanges.

During yesterday’s parliamentary question period, Christopher Hui, the Secretary for Financial Services and Treasury, said the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) were reviewing regulations on digital assets.

The HKMA and SFC “will monitor market developments and review requirements for VA-related activities if necessary,” Hui said.

Hui made the remarks in response to a question from a lawmaker about whether regulators would speed up the verification process for cryptocurrency licenses.

He added that licensed corporations or registered institutions can distribute cryptocurrency-related products after notifying regulators and “do not need to apply for a change in licensing conditions.”

From June 1, all cryptocurrency trading platforms in Hong Kong must have an SFC license or be in the process of applying for one.

Hong Kong lawmaker Duncan Chiu has described the city’s licensing rules as “overly stringent” and expressed concern that the rules could result in the collapse of stock exchanges.

Gate.HK, OKX and Huobi have withdrawn their applications for virtual asset trading platform (VATP) licenses in Hong Kong.

Chiu said the withdrawal of the exchanges’ licenses “has shaken market participants’ confidence in Hong Kong’s efforts to develop Web3.”

Last month, Hong Kong announced it would establish a subcommittee to develop regulations for cryptocurrencies.

“To promote the development of Web3 and virtual resources in Hong Kong, the Legislative Council of the Hong Kong Special Administrative Region recently established the Sub-Committee on the Development of Web3 and Virtual Resources,” said Johnny Ng Kit-Chong, Member of the Legislative Council of the Hong Kong Special Administrative Region.

However, in an unusual turn of events, Hong Kong is looking to focus on DeFi and the Metaverse.

“The emerging DeFi and metaverse technologies, which are closely linked to the broader development of virtual assets and Web3, are likely to create various opportunities for the financial services industry in Hong Kong,” said Enoch Fung, CEO of AoF and Executive Director of the Hong Kong Institute of Monetary and Financial Research.