Hong Kong wants to become an international crypto hub even as jurisdictions like the US cast a wary eye on the sector. In August, the first licenses were issued under a new system to regulate crypto exchanges offering trading in tokens like Bitcoin and Ether. The regime is part of Hong Kong’s effort to attract fresh capital and talent back to the city, after its reputation was tarnished by years of harsh Covid-19 curbs and a crackdown on political dissent. Initial reaction was largely positive from digital-asset firms, but there was a lack of major new investment pledges. Hong Kong’s push appears to have quiet backing from Beijing even as mainland China sticks with a ban on crypto trading.
The new rules mean that retail investors can trade coins on exchanges licensed by the city’s Securities and Futures Commission. Hong Kong says its approach is high on consumer protection, with strict criteria on which virtual assets can be bought and sold. Some of the factors that platforms must consider when deciding on tokens to offer include how long a coin has been in circulation, its market capitalization and average daily trading volume. The tokens must also be incorporated in at least two cryptocurrency indexes from prominent institutions, one with a background in traditional finance. In addition, the SFC mandates that crypto firms must put other safeguards in place before accepting customers, like assessing if users have essential knowledge of digital assets before investing, and setting trading or position limits “with reference to the client’s financial situation.”
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