Hong Kong moves towards legalizing crypto with soft backing from Beijing

Updated: 21 February 2023

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China has been against traditional cryptocurrencies for years, to the point where it is impossible to legally use cryptocurrencies in the country in any way. It even brought rules and laws that made it impossible for Bitcoin miners to continue operating in the country.

However, as Hong Kong prepares for a consultation process that could possibly lead to legalizing some form of retail crypto trading, Beijing does not seem to be opposed. Quite the opposite, in fact, as the mainland government seems to be subtly supporting this idea.

***JUST IN***🚨-Hong Kong’s #Crypto Hub Ambitions Win Quiet Backing From Beijing As Asia Narrative Heats Up #Bitcoin #ETH

— Crypto Macro (@cryptomacro14) February 21, 2023

Beijing’s officials in Hong Kong have been visiting crypto events

Recent reports have suggested that some of the officials from China’s Liaison Office have visited crypto gatherings in Hong Kong a number of times. So far, the tone of the visits has been reported as friendly, and so were the follow-up calls involving certain projects.

Chinese officials, including representatives from the Liaison Office, have been attending crypto gatherings in Hong Kong and showing friendly interest in developments. The move suggests Beijing's quiet support for the Honk Kong region's crypto hub ambitions.

— TheCryptoBasic (@thecryptobasic) February 21, 2023

Whie this is not an open endorsement of Hong Kong’s development in terms of cryptocurrencies, some stakeholders have seen it as such. It might mean that Beijing does not have a problem with Hong Kong’s attempt to become a crypto hub, since it is using its own, separate legal system. Furthermore, this could work out well for China, as Hong Kong could serve as a testing ground for certain aspects of crypto adoption.

After all, China used Hong Kong like that in the past, as it was the country’s first test of open markets back in the 20th century. National People’s Congress member, Nick Chan, who is also a known crypto lawyer, said that “As long as one doesn’t violate the bottom line, to not threaten financial stability in China, Hong Kong is free to explore its own pursuit under ‘One Country, Two Systems.”

Hong Kong is making moves to become a crypto hub

Yesterday, February 20th, Hong Kong’s securities regulator, the SFC (Securities and Futures Commission) made its first move to introduce a legal form oof retail crypto trading. It started a consultation process for VASPs (Virtual Asset Service Providers), looking to obtain a license for providing trading services for retail. There are numerous requirements involved, as proposed by SFC, and some of them involve things such as a due diligence process on digital assets before they get listed on trading platforms.

This would result in only pre-approved cryptos becoming available to digital currency traders. Another requirement would be to set up a risk profile for users, so that their exposure would remain at acceptable and “reasonable” amounts.

Further, it is worth mentioning that the SFC has concluded a multi-year consultation process, which will allow licensed exchanges to serve expert investors. This includes investors with a net worth of more than $1 million, and this should start on June 1st this year.

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