The CEO of Hong Kong’s Securities and Futures Commission (SFC), Julia Leung Fung-yee, recently emphasized the importance of incorporating virtual assets into the regulatory system, highlighting that crypto trading is a vital part of the virtual asset ecosystem.
Leung’s remarks came in the wake of the collapse of FTX, a crypto exchange, in November 2022. Leung explained that the introduction of a new licensing system for virtual asset providers would ensure the protection of investors while also considering the risks faced by financial institutions.
She believes that integrating virtual asset providers into the regulatory framework is the only way to foster innovation and enhance market trust following the bankruptcy of FTX.
Hong Kong leveraged the FTX incident to mitigate regulatory risks associated with centralized exchanges.
In December 2022, less than a month after the crisis unfolded, the legislative council of Hong Kong included virtual asset service providers under the same legislation that governs traditional financial institutions.
The new regulations introduce stringent Anti-Money Laundering guidelines and investor protection laws for digital asset exchanges seeking to operate in Hong Kong.
Furthermore, a new licensing scheme has been established to grant retail investors access to trade virtual assets.
Previously, digital asset trading was restricted to professional investors and traders with at least $1 million in bankable assets.
Leung views Hong Kong’s cryptocurrency licensing system as a testament to China’s “one country, two systems” policy.
Mainland China banned cryptocurrencies in 2021, whereas Hong Kong chose a different approach by fostering a welcoming environment for the crypto industry.
In the past year, more than 150 Web3 firms have set up operations in Hong Kong’s Cyberport, a digital hub established by the local government to promote innovation.
This influx of companies followed the government’s allocation of 50 million yuan ($7 million) to expedite the development of Web3.
Leung’s remarks highlight Hong Kong’s commitment to adapting its regulatory framework to the evolving virtual asset landscape.
By embracing cryptocurrencies and implementing appropriate regulations, Hong Kong aims to strike a balance between innovation and investor protection, positioning itself as a hub for the growing crypto industry.
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