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Hong Kong’s New Crypto Regulations – Opportunities, Risks, and China’s Backing

Hong Kong’s New Crypto Regulations – Opportunities, Risks, and China’s Backing

The recent launch of Hong Kong’s new crypto regulation has sparked interest among the crypto community. The city-state is looking to fully open its doors to crypto asset trading and investment, with a focus on establishing a licensing regime for crypto service providers. The move is expected to attract capital and talent to Asia, making it a hub for the crypto industry.

Opportunities

One of the significant opportunities presented by Hong Kong’s new crypto regulation is the potential for retail investors to participate in the crypto market. Previously, only institutional investors and high-net-worth individuals had access to this market. The new licensing regime is expected to provide a more level playing field for all investors, increasing market liquidity and improving price discovery.

Hong Kong’s reputation as a financial hub could make it an attractive destination for global crypto companies seeking to expand their presence in Asia. The city-state’s strong legal framework and supportive regulatory environment could encourage crypto companies to set up shop in Hong Kong, bringing job opportunities and economic growth to the region. Another potential opportunity presented by the new crypto regulation is the potential for Hong Kong to become a leader in green finance. The Hong Kong government has expressed interest in launching tokenized green bonds for institutional investors. This could attract investors interested in investing in environmentally sustainable projects, promoting responsible investing and reducing the carbon footprint.

Risks

While the new crypto regulation presents several opportunities, it also comes with its fair share of risks. The most significant risk is the potential for increased market volatility. The crypto market is notoriously volatile, and retail investors who lack experience and knowledge of the market may be at risk of significant losses.

There is the risk of crypto scams and fraudulent activities. The unregulated nature of the crypto market has made it a hotbed for scams and fraudulent activities. The new licensing regime is expected to address this issue, but it remains to be seen how effective it will be. Another significant risk is the potential for regulatory arbitrage. As Hong Kong establishes its licensing regime, crypto companies may look to set up shop in the city-state to avoid regulation in other jurisdictions. This could result in a race to the bottom, where jurisdictions offer increasingly lax regulations to attract crypto companies.

I must highlight this. On the surface, the new regulations appear to be a positive development for Hong Kong’s crypto industry, but are there any risks involved? One of the potential concerns is that the new regulations could stifle innovation by imposing too many restrictions on the industry . For example, the proposed regulations require all crypto exchanges to have a minimum capital of HK$5 million (US$644,000), and exchanges must maintain a 1:1 reserve ratio of fiat currency to digital assets. Such requirements could be difficult for some smaller players to meet, which could hurt the competitiveness of the industry.

China’s Backing

One question on the minds of many is whether China will back out of its support for Hong Kong’s crypto ambitions. China has historically been hostile to crypto, with a ban on cryptocurrency transactions in 2021. However, recent developments suggest that China may be softening its stance on crypto

Justin Sun’s crypto exchange, Huobi Global, has announced that it is applying for a crypto trading license in Hong Kong and launching a new trading venue there. This move suggests that China may be willing to support Hong Kong’s crypto ambitions, providing a boost to the city-state’s efforts to establish itself as a hub for the crypto industry.

On the flip side, many do see potential uncertainty surrounding China’s stance on cryptocurrencies too. If you remembered in 2021, China banned cryptocurrency transactions, which sent shockwaves throughout the global crypto industry. Although Hong Kong is technically part of China, it operates under a separate legal system and enjoys a high degree of autonomy. However, there are concerns that China could still exert its influence and try to clamp down on Hong Kong’s crypto industry if it sees it as a threat to its own regulatory goals

Conclusion

Hong Kong’s new crypto regulation, which is set to establish a licensing regime for crypto service providers, presents an opportunity for the city-state to become a hub for the crypto industry in Asia. This move is expected to attract capital and talent to the region, leading to improved market liquidity and increased price discovery.

However, the new regulation also poses some risks that need to be taken into consideration. One of the risks is the potential for increased market volatility as more players enter the market. Another risk is the possibility of scams and fraudulent activities as the industry expands and attracts more investors. To mitigate these risks, the Securities and Futures Commission is adopting a “regulate to protect” approach to digital assets.

As mentioned above, there is the risk of regulatory arbitrage, which could arise if other countries in the region adopt different regulatory frameworks for crypto service providers. To address this risk, the Hong Kong Monetary Authority (HKMA) has issued its conclusions on cryptoassets and stablecoins regulation, aiming to provide clarity and consistency across the industry.

My view is Hong Kong’s new crypto regulation presents both opportunities and risks for the city-state to establish itself as a hub for the crypto industry in Asia. While attracting capital and talent, improving market liquidity and increasing price discovery are some of the opportunities, market volatility, fraudulent activities, and regulatory arbitrage are some of the risks that need to be addressed to ensure the effectiveness of the new regulatory framework.

 

Source: https://www.securities.io/hong-kongs-new-crypto-regulations-opportunities-risks-and-chinas-backing/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Lunar New Year Chinese visitors to Singapore, Hong Kong help revive gold post-Covid

Lunar New Year Chinese visitors to Singapore, Hong Kong help revive gold post-Covid
  • ‘We have seen an increase in visitors … certain Chinese customers, who have not been buying from us for a long time, have resumed’, one trader said
  • Gifts of gold at Lunar New Year are thought to bring luck to both giver and receiver. China is the biggest consumer and producer of the precious metal

 

 

China’s reopening ahead of the Lunar New Year holiday has brought back the lustre of gold in two of Asia’s most important financial hubs – Hong Kong and Singapore.

A steady stream of Chinese visitors since borders reopened on January 8 has stoked up premiums on gold – a mark-up paid to secure speedy deliveries and cover overhead costs – by around 300 per cent to US$3 an ounce from a year ago, dealers say.

Spot gold prices – what the customer on the street actually pays – are hovering around an eight-month peak of US$1,900 an ounce in global markets.

“It’s early days yet, but we have definitely seen an increase in visitors over the past week. Certain Chinese customers, who have not been buying from us for a long time, have resumed,” said Padraig J Seif, Founding Partner of the Hong Kong based-Precious Metals Asia.

Traditionally, gold buying peaks in the run up to Lunar New Year, which this year falls on January 22. Visitors from the mainland like to shop in Hong Kong and Singapore because of the high quality of precious metal products such as jewellery and coins.

“Gold holds a special place for Chinese people, it symbolises wealth and prosperity, making it a popular choice for Lunar New Year gifting,” said Hong Kong-based Chow Tai Fook Jewellery Group in a statement, adding that it had seen an increase in gold purchases recently and was expecting a “surge in demand for bridal jewellery as 2023 is considered to be an auspicious year for couples looking at tying the knot”.

Buying momentum likely to increase

Around 64,000 mainland Chinese visitors have streamed into Hong Kong since borders reopened. That flow is expected to increase as a quota of 50,000 travellers per day across four land border checkpoints will be raised to 65,000 a day for four days from Wednesday.

City authorities have also announced that they would increase the number of daily rail tickets from Wednesday.

The momentum in gold sales is expected to last even after the holiday season because of around two years of pent up demand, as many Chinese people are still reluctant to travel because of Covid-19 but are expected to gradually start taking trips.

The holiday season also arrived earlier this year, as it often falls in February. Beijing’s abrupt U-turn on zero-Covid in late December surprised many people and did not give them enough time to firm up travel plans before Lunar New Year.

Gold has long been considered a way to store and lock in value, and demand for it spiked in Asian markets in the initial months of the pandemic in 2020 because of a climate of uncertainty. But the bullion trade in Asian hubs crashed soon after China imposed travel restrictions.

“Lot of people stopped buying because they were experiencing financial difficulties,” said Seif, whose sales revenue in the first two weeks of January has already surpassed that of the entire month a year ago.

It’s not just retail buyers of jewellery, either – long term investors are also turning back to gold. The US Federal Reserve is expected to this year soften its aggressive rate increases, which could make returns on the precious metal higher than on interest-bearing bonds.

Investors have also gravitated towards the precious metal because of its safe haven appeal due to geopolitical tensions such as the Russia-Ukraine war and the looming prospect of a global recession.

Investment bank Goldman Sachs expects gold to trend even higher than it is now later this year, at around US$1,950 an ounce.

Demand in China, the world’s largest gold consumer and also the biggest producer of the precious metal, is expected to have an important bearing on prices.

Like Hong Kong, Singapore’s gold trade is also benefiting from China scrapping travel restrictions with the city state bracing for overall visitor arrivals to rise to 12-14 million, around double the year before.

“Chinese gold demand is expected to drive the global market this year,” said Spencer Campbell, the Singapore-based director of SE Asia Consulting Pte Ltd.

“With the easing of restrictions in China, retail demand for gold is expected to increase in Singapore and Hong Kong as more people shop for gifts and jewellery to celebrate the Lunar New Year.”

Demand has picked up across Asia since late last year, he added.

Indian consumers – in second place after their Chinese counterparts – bought a record amount of the metal in the fourth quarter of last year.

Some Asian investors have switched to precious metals from cryptocurrencies after one of the largest global exchanges, FTX, went bankrupt in November following a surge in customer withdrawals.

Bitcoin, one of the most actively-traded currencies that soared to an all-time high of US$69,000 in November 2021, is now trading at around US$21,000.

However, one Singapore-based fund manager appeared unimpressed by gold’s charms and said savvy investors can take advantage of cryptocurrency volatility, with traders buying at low prices and selling when they rise.

“Gold may be a safe haven” but there were many other opportunities elsewhere for investors “to profit from price fluctuations”, said Anndy Lian, a partner at the Singapore-based Passion Venture Capital and author of the book NFT: From Zero to Hero.

Bullion dealers have said the increased purchasing of gold following China’s reopening is likely to last until the end of the first quarter. Chinese appetite for gold could well continue at the same brisk pace throughout the year if the economy revives and incomes bounce back, they noted.

 

Source: https://www.scmp.com/week-asia/article/3207411/lunar-new-year-chinese-visitors-singapore-hong-kong-help-revive-gold-post-covid

 

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Positive Crypto Signs from U.K. and Hong Kong: Who is the New Crypto Hub?

Positive Crypto Signs from U.K. and Hong Kong: Who is the New Crypto Hub?

U.K. has a new pro-crypto PM and a new name for stablecoins

At the point of the news on the vote to recognize Crypto as regulated financial instruments, Bitcoin just spiked to $21,170. This aligns with the new crypto developments in the U.K. market. As part of the Financial Services and Markets Bill, the U.K. House of Commons, the lower house of Parliament, agreed on Tuesday to regulate cryptocurrency assets as financial instruments. The House of Lords, the upper house, will vote on the bill before it becomes law. This occurs as Rishi Sunak, who on Monday was appointed as the nation’s next prime minister, has a history of endorsing cryptocurrencies.

The local cryptocurrency sector, which recently celebrated Rishi Sunak’s election as the nation’s new prime minister, will likely applaud moves to grant legal legitimacy to digital assets. When Sunak served as the Boris Johnson administration’s finance minister, he presented the markets bill, which indirectly led to the stablecoin regulations.

The bill expands upon current stablecoin regulating provisions and uses the term “Digital Settlement Assets” (DSA) in place of “crypto assets,” moving away from the use of the phrase “crypto assets.” Stablecoins with a focus on payments that are cryptocurrencies tethered to the value of other assets like the U.S. dollar or gold were already covered by elements in the draft bill that would have extended existing restrictions to them.

According to Griffith, the financial services and city minister, the crypto provision “clarifies that crypto assets could be brought within the scope of the existing provisions” of the Financial Services and Markets Act 2000 relating to regulated financial activities. The crypto provision depends on the definition of “crypto asset” inserted by a new clause 14. The regulations might control cryptocurrency advertising and ban businesses that aren’t allowed to operate nationwide.

“The Treasury will consult on its approach with industry and stakeholders ahead of using the powers to ensure the framework reflects the unique benefits and risks posed by crypto activities,” Griffith said. He added: “The Treasury will consult on its approach with industry and stakeholders ahead of using the powers to ensure the framework reflects the unique benefits and risks posed by crypto activities,”

The Crypto and Digital Assets All Party Parliamentary Group (APPG) provides a forum for parliamentarians, regulators and the U.K government to discuss challenges and opportunities relating to the crypto sector. This group, chaired by Scottish National Party member of Parliament (MP) Lisa Cameron, has issued a written statement to the media seeking regulatory clarity and business certainty. “U.K. crypto and digital asset firms desperately need clarity over the U.K.’s approach to crypto policy and for the government to deliver on its vision for the U.K. crypto sector,” Cameron said in the statement.

The legalization of cryptocurrencies and digital assets as financial instruments is still pending. Important requirements that must be met for the Bill include: Before the Bill receives final royal sanction from the next king, King Charles III, the House of Lords will need to accept or change it.

The U.K. government can assure financial stability and strong regulatory standards by recognizing the promise of this technology and regulating it at this time, allowing these new technologies to be employed in the future reliably and safely.

Hong Kong wants to be positioned as crypto hub, while Singapore pivots

A few years back, Hong Kong was on the right track to becoming a crypto hub. Then Hong Kong’s regulator, the Securities Futures Commission (SFC) knocked on doors. Exchanges were questioned about listing tokens that seemed like securities and also issued warnings about high leverages.

Fast forward to 2022, October 31, the Hong Kong government is exploring legalizing retail crypto trades. Financial Secretary Paul Chan announced in a keynote speech at the Hong Kong Fintech Week conference that authorities would begin a consultation process on providing retail investors with “a suitable degree of access” to virtual assets. “We want to make our policy stance clear to the global market, to demonstrate our determination to explore fintech with the global virtual asset community,” he added.

In contrast, Singapore is significantly restricting access to cryptocurrencies for individual investors after last year’s market collapse brought down several digital asset companies with ties to the Southeast Asian country and caused much greater losses throughout the industry. If you remember, many of the huger crypto companies moved from Singapore to Dubai, and now the same thing is happening again. Hong Kong appears to be the next hotspot for digital-asset enterprises, entrepreneurs, and investment.

Even the head of the central bank, Ravi Menon, admitted in a Bloomberg Television interview that some crypto enterprises with a retail concentration would leave the city-state, stating plainly, “We wish them good luck.”

Cryptocurrencies “play a supporting role in the broader digital asset ecosystem, and it would not be feasible to ban them,” the Monetary Authority of Singapore (MAS) stated in a media statement. Singapore’s stand is very firm and has made it clear that they are not banning cryptocurrencies and is working towards reducing risks.

Positive signs

I see all these are positive signs. Singapore is planning ahead. Hong Kong is leaving some room going forward. U.K.’s plan is ambitious. Hong Kong seems like walking on a different path than China which has banned cryptocurrencies completely. People on the ground are now speculating that Hong Kong could be the outflow channel for the Chinese to start trading cryptocurrencies again.

The recognition of cryptocurrencies under proper regulations would go very far. I am optimistic about the outcomes. #anndylian

 

Source: https://www.benzinga.com/22/11/29572049/positive-crypto-signs-from-u-k-and-hong-kong-who-is-the-new-crypto-hub

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j