Hong Kong is in a fairly difficult place making an attempt to change into probably the most distinguished cryptocurrency hubs. Regardless of town’s efforts to create a positive regulatory setting, greater than a dozen exchanges have struggled to acquire formal licenses from the Securities and Futures Fee.
In line with Bloomberg, the state of affairs reveals the challenges going through Hong Kong’s cryptocurrency ambitions.
Cryptocurrency: Harder regulatory scrutiny
The Securities and Futures Fee is taking a tough have a look at cryptocurrency exchanges, and the preliminary outcomes of those inspections have sounded the alarm about unhealthy practices.
Experiences on this regard point out that the practices of 11 exchanges are unsatisfactory and their powers are thought-about to be near being licensed.
They vary from poor cybercrime safety to over-reliance on a small variety of senior executives to handle shopper sources. Crypto.com and Bullish are beneath investigation. Consequently, their actions in Hong Kong lagged behind.
Solely OSL and HashKey have full metropolis licenses. Though compliance has been troublesome, the Securities and Futures Fee hopes to situation extra licenses by 2024.
Attorneys mentioned that 12 firms have withdrawn their petitions, together with well-known Bybit and Huobi HK. These firms are more and more apprehensive that the Securities Regulatory Fee’s strict guidelines could battle with their enterprise practices.
Listing of Hong Kong-based cryptocurrency exchanges that withdrew their license purposes. Supply: Hong Kong SFC
The affect of the JPEX scandal
Regulatory scrutiny of the business has intensified following the JPEX scandal, during which an unlicensed platform was accused of defrauding 2,600 victims, leading to 1000’s of buyers dropping a complete of greater than $200 million.
This incident additional accelerated the CSRC’s complete implementation of strict compliance measures. Regulators deal with defending shopper belongings and guaranteeing sturdy know-your-customer preparations.
The JPEX case clearly demonstrates that the SFC is not going to take any motion that jeopardizes the integrity of Hong Kong’s cryptocurrency market.
This creates a dilemma for exchanges hoping to get a chunk of the profitable Hong Kong market. Most of those firms have ambitions to serve clients in mainland China, the place cryptocurrency buying and selling is banned.
The state of affairs has change into extra difficult beneath the “one nation, two methods” framework, with exchanges now realizing they can’t serve the bigger mainland market by Hong Kong. This might deter potential buyers and firms from organising store within the metropolis.
Compete with different jurisdictions
This places Hong Kong’s ambitions at odds with its need to change into a cryptocurrency hub and rising competitors from Singapore. Whereas Hong Kong has taken some constructive steps in direction of establishing an open and secure regulatory framework, the gradual tempo of licensing has drawn criticism.
Some observers are actually questioning whether or not Hong Kong can present a pleasant setting for cryptocurrency firms in contrast with different jurisdictions the place rules are clearer and extra encouraging.
The outlook shouldn’t be so bleak, and business insiders stay hopeful. If correctly regulated, Hong Kong can regain its former glory as one of many world’s main cryptocurrency hubs.
Featured picture by way of Getty Pictures, chart by way of TradingView
