Hong Kong may permit ordinary investors to trade in cryptocurrencies and crypto exchange-traded funds in an effort to restore its status as a fintech centre and compete on an equal footing with Singapore. In contrast to mainland China's restrictive regulations on cryptocurrencies, the government has released a policy statement on virtual assets.
Financial regulators permit just certain types of futures trading
The Securities and Futures Commission (SFC) of Hong Kong published a circular on October 31 outlining guidelines for organizations thinking about making an exchange-traded fund public (ETF). It stated that management organizations in Hong Kong would need to have a strong track record of regulatory compliance and three years of experience managing ETFs, in addition to the prior regulatory compliance criteria for unit trusts and mutual funds.
By first allowing only ETFs tied to Bitcoin and Ether futures to be listed, the regulator gave the impression that it would follow the Chicago Mercantile Exchange's lead. It will also conduct a public consultation on how to open up access to digital assets for small investors.
Move Draws Mixed Response
HKEX, one of the major stock exchange groups in Asia, applauded the decision by tweeting that it will assist Hong Kong's development into the region's top ETF market. Sam Bankman-Fried, the creator of the cryptocurrency exchange FTX, who relocated from Hong Kong to the Bahamas in 2021, claimed that the area might develop into a Web3, blockchain, and cryptocurrency centre.
While some people have supported the change, others are worried that it won't actually happen. In a recent post on Hong Kong's cryptocurrency decision, former BitMEX CEO Arthur Hayes warned that China might reverse its supportive crypto policy.
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The conclusion
As a result of China's crackdown on cryptocurrencies, many companies involved in the industry, including the cryptocurrency exchange FTX, fled Hong Kong.
The most recent strategy intends to diverge from China and throw open its doors to cryptocurrency companies. The Hong Kong legislature will vote on a bill that would impose statutory licensing requirements on companies that offer virtual assets; if passed, the law would go into effect in March of the following year.