Hong Kong’s position as an upcoming hub of crypto businesses is being increasingly noticed and discussed in the relevant circles.
In a tweet, Coinbase CEO Brian Armstrong referred to the city-state to stress that the United States may lose its position as the financial hub of the world for lacking crypto regulations.
Armstrong Calls for Regulations
“America risks losing it’s status as a financial hub long term, with no clear regs on crypto, and a hostile environment from regulators. Congress should act soon to pass clear legislation. Crypto is open to everyone in the world and others are leading. The EU, the UK, and now HK,” Armstrong said, retweeting a post saying Hong Kong will make it legal to sell, purchase, and trade crypto assets for all its citizens from June 1.
The news that Hong Kong would allow its citizens to buy, sell, and trade crypto assets is based on a speech made in January at a web3 conference by Hong Kong’s Financial Secretary Paul Chan.
“Hong Kong has completed the legislative work of setting up a licensing system for virtual asset service providers, and the new system will be implemented in June of this year… Financial intermediaries and banks will be able to cooperate with licensed virtual asset exchanges in providing trading services to customers, subject to meeting relevant regulatory conditions,” Chan said at the conference.
Increased Regulatory Scrutiny
Brain Armstrong’s critique of America’s lack of crypto regulation and calling on Congress to enact such laws comes in the wake of increased regulatory scrutiny in the aftermath of FTX’s collapse.
The SEC chair, Gary Gensler, has proposed new rules for crypto firms acting as qualified custodians for institutional funds. He argued that there should be a transparent mechanism to ensure customers’ funds are separated from the companies’ assets to run their affairs.
Gensler said this was necessary to ensure clients don’t suffer in the event of bankruptcy or loss of funds through hacking. Shortly after, a Coinbase executive clarified that the firm is in line with SEC proposals on this count.
Another regulatory uncertainty that Coinbase now needs to factor in is the SEC’s crackdown on staking services, calling them securities. In the past week, the agency forced Kraken to stop its staking services offered to US customers and pay a fine of $30 million for offering unregistered securities. Coinbase’s CEO could be worried that it might be coming for his company as well.
The Case of Hong Kong
Hong Kong is a special administrative region of China that enjoys an autonomous status in its legislative and governance matters. While China banned trading and mining of cryptocurrencies within its jurisdiction in 2021, Hong Kong seems to be emerging as the destination for such businesses with an eye on China.
The city government has taken quite a few regulatory initiatives, something that most jurisdictions in the world, including the US, lack. In December last year, an amendment to existing legislation brought digital assets into the ambit of anti-money laundering and terror-financing laws.
It also made crypto firms seek licenses before starting operations in Hong Kong. The Securities & Futures Commission (SFC) of Hong Kong in January said it would release a list of highly liquid digital assets that citizens can trade.