Key highlights:
- Companies are moving to Hong Kong to take advantage of Chinese citizens’ requests for crypto trading services.
- The Hong Kong Monetary Authority and the Securities and Futures Commission will host a meeting on April 28 to help crypto firms find new banking partners.
- The Hong Kong government has created a new regulatory framework that legalizes retail investors’ crypto trading, making the market an attractive option for crypto companies.
Recently, many cryptocurrency companies are moving to Hong Kong to take advantage of the requests of Chinese citizens. Companies leaving Singapore, which has enforced strict regulations since last year, are choosing Hong Kong as a more crypto-friendly alternative.
The key reason why Hong Kong has been described as “crypto-friendly” is that the government has created a new regulatory framework that will legalize retail investors’ crypto trading. There have been many laws regarding the cryptocurrency sector in China since 2021, but Hong Kong, which is based in mainland China, is a market that continues to grow despite this. Chinese citizens also use businesses in Hong Kong to trade crypto.
A meeting between bankers and companies will be held on April 28 at the Hong Kong Monetary Authority, Bloomberg reported on March 28. The meeting will be held jointly with the Securities and Futures Commission. One of the reasons for the meeting is that many crypto firms are looking for new banking partners in the wake of the recent banking crisis in the US. As you know, three crypto-friendly banks, Silvergate Capital, Silicon Valley Bank, and Signature Bank, went bankrupt in March.
Exchanges Expand Service Plans
Investors in China are looking for safe and smart solutions to capitalize on their savings. Therefore, for any company that offers trading services to have an office in Hong Kong can be quite profitable. This is why it will be OKX, KuCoin, Gate.io, and Huobi among the major crypto exchanges considering opening an office in Hong Kong.
The world’s largest crypto exchange, Binance, is looking for employees for several positions in the Chinese-speaking office to be located in Hong Kong. OKX will apply for a license to operate an exchange in Hong Kong, establishing two companies. Huobi board member and Tron blockchain founder Justin Sun said that Huobi plans to increase the number of employees at its Hong Kong headquarters from 70 to 200 before the end of 2023. The goal is the same here, to respond to Chinese citizens’ demand for crypto trading.
Digital Financial Center Hong Kong
Crypto companies may be thinking that China’s government in Beijing has approved Hong Kong to be comfortable with crypto trading. This paves the way for companies to relocate to Hong Kong to gain legal access to the Chinese market.
Hong Kong Financial Services and Treasury Minister Christian Hui said that nearly 90 companies operating in the field of digital assets have been active in the city since October 2022. The Hong Kong Securities and Futures Commission (SFC) has also published an advisory on the proposed regulatory framework for crypto trading platforms, inviting market participants to share their views. The regulator will also allow investors with the appropriate risk profile to trade large volumes on licensed trading platforms.
Although Chinese users can access different crypto exchanges using VPN, they cannot convert their crypto to fiat currency. Exchanges in Hong Kong allow users to trade crypto with the Chinese Yuan. Although China banned all cryptocurrency activities in the country in 2021, citizens’ interest in crypto has not ceased. In fact, Mainland China was the fourth largest crypto market in the world until July 2022, according to blockchain research firm Chainalysis.
Hong Kong Financial Secretary Paul Chan said in February that the government has allocated HK$50 million to develop the Web3 industry. That’s about $6.37M.
Chinese Are Free to Access Exchanges
According to the laws of the Hong Kong Securities and Futures Commission, platforms are responsible for preventing individual customers from accessing trading platforms from jurisdictions where crypto trading is illegal. However, the platforms do not impose strict controls on this issue because they think that China will ease the restrictions.
On the other hand, Hong Kong branches of Bank of China Ltd., Bank of Communications Co., and Shanghai Pudong Development Bank are allegedly preparing to offer banking services to local crypto firms.
