Mar 21, 2023 at 07:09More than 80 crypto-asset-related companies have stated their desire to enter the Hong Kong market. This eagerness is driven by the government’s intention to establish itself as a global crypto hub with a more comfortable and friendly stance on digital asset regulation. How this may affect the market as a whole is discussed below.
Why it matters?
The appearance of new open spaces for digital assets is becoming more and more relevant as the U.S. or Chinese governments increasingly control the crypto industry. Especially the latter, where conducting any transactions within the country is prohibited.
The inability to operate in the local market is forcing Chinese cryptocurrency companies to look for new locations, in particular, focusing on foreign options. Some organizations are finding loopholes, opening subsidiaries to conduct necessary operations in crypto-loyal countries (e.g., Singapore or Dubai), but leaving the development hub in China in order to hire locally available technical specialists.
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However, if Hong Kong introduces new regulations for dealing with digital assets, some Chinese companies may move closer to home and do business more freely. The same is valid for other countries where digital assets are banned or overly regulated by law, making it impossible to do business.
Hong Kong’s plan: the essence of the new market regulation
The world of Web3 continues to develop. Huge funds are pouring into the industry, and the best brains are creating more and more new technologies. However, the market is not protected against speculation, which is why we are now seeing a series of bankruptcies and layoffs in the industry. China’s action to ban digital assets to protect investors from untrustworthy companies seems logical, but it could leave the country behind in the Web3 digital race.
Hong Kong, with its initiative, could become for China a laboratory testing ground for Web3 business. Thus, after evaluating the potential of the project, in order to reduce all possible risks, the Chinese authorities may become more permissive to the industry.
Under the new regulation, all centralized exchanges (CEX) or marketing services within Hong Kong are expected to be licensed by the securities and futures authority. Among the requirements:
- Proper custody of customers’ digital assets.
- Completing a KYC for users.
- A high level of cybersecurity.
- Accounting and auditing.
- Risk management.
- Anti-money laundering, countering the financing of terrorism, and preventing market fraud.
In simple terms, CEX will not be able to operate in the Hong Kong market until they receive the necessary approval. These requirements will be reviewed by March 31, and if all goes according to plan, the new licensing regulatory scheme will go live on June 1, 2023. Meanwhile, the government of Hong Kong has already allocated $50 million for crypto projects development.
Hong Kong Allocates HK$50M For #Web3: #Crypto Task Force Plannedhttps://t.co/0WpsVrHRom
— John Morgan (@johnmorganFL) February 22, 2023
In addition, according to analyst Adam Berker, only large-cap assets are expected to be admitted to trading. Here’s a rough list of tokens that could be approved.
Additionally, it is expected that only large-cap assets that are included in 2 or more indices will be accepted for trading. Here is the potential list of acceptable tokens prepared by @ConorRyder pic.twitter.com/yFhVcOBEJi
— Adam Berker (@adam_berker) March 21, 2023
Such regulation could help a large number of companies to establish themselves in Hong Kong, which should lead to the growth of the cryptocurrency ecosystem in the future. Moreover, as it turned out, not only local market participants but also the global Web3 community have directed their eyes in the direction of the eastern market.
How might this affect the cryptocurrency market?
Hong Kong’s new crypto policy got virtual asset providers and businesses worldwide excited. Thus, the CEO of TRON and Huobi, Justin Sun, said that the city is ready to become a leading crypto hub. In addition, the businessman noted the active support of the Hong Kong authorities for the digital asset industry.
“I’m thrilled to see Hong Kong’s commitment to supporting its development. With a comprehensive support system for VA [virtual assets] and Web3 startups, Hong Kong is well-positioned to be a leading hub in Asia,” he said.
San Francisco is the number-one city in the world for crypto venture capital. According to crypto-enthusiast Nathann.eth, the location accounts for 45,16% of total capital among the top 50 global venture capital firms. The rest of the numbers are divided as follows.
- Hong Kong — 16,7%.
- New York — 14,4%.
- Singapore — 5,2%.
- Austin — 4,7%.
- London — 3,4%.
- Shanghai — 2,5%.
- Other — 8,0%.
As you can see from the chart, Hong Kong is still far behind San Francisco. If the new rules come into force, the flow of new projects in Hong Kong that will be selected may attract investors to the new site. Thus, the percentage may soon change.
Amid the news of the Asian cryptocurrency market’s development, some users have even started to buy CFX tokens.
TAKE 2 (take 900 more like) ~ Hong Kong / China / #Crypto … this is not a meme … they really are opening up the economy to crypto OFFICIALLY. Partly, I’d imagine, to economically feck with the USA. I’m not joking. And wit that in mind, I’ve just bought some $CFX
— CryptoFerret (@FerretCrypto) March 21, 2023
It is so far the only publicly available and permission-free blockchain in China that complies with regulations. The project is engaged in giving crypto companies that build and operate in Asia the ability to connect decentralized economies to solidify the global DeFi ecosystem.
In addition, interest in eastern tokens may not be limited to CFX. In this regard, crypto researcher Malik has compiled a list of assets to watch out for (not financial advice).
China Narrative
China will become a #Metaverse tech leader during 2023
Hong Kong plans to allow retail investors trade large #crypto tokensCoins You Should Accumulate $VET $0.025$CKB $0.005$HIGH $2.5 $TVK $0.045$MITX $0.017$KING $0.017#Bitcoin #Crypto
— Malik | Alpha Altfolio (@Malik_Farooq_01) March 20, 2023
Do you think Hong Kong has a chance to become the world’s main crypto hub? Let us hear about it in the comments.
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