HONG KONG – In an effort to restore Hong Kong’s reputation as a fintech center, the government has suggested enabling ordinary investors to trade in cryptocurrencies and crypto exchange-traded funds.
A number of start-ups have moved to other markets, such as Singapore and Dubai, after the city, which had earlier suggested restricting cryptocurrency trade to professional investors, received harsh criticism for planned laws for digital assets that would have stifled innovation.
Financial Secretary Paul Chan announced in a keynote speech at the Hong Kong Fintech Week conference that authorities will begin a consultation process on providing ordinary investors with “a sufficient degree of access” to virtual assets.
To demonstrate our resolve to explore fintech with the international virtual asset community, we want to make our policy stance clear to the global market, he added.
Additionally, the government will look into the legality of so-called smart contracts, which are self-executing transactions whose outcomes rely on pre-programmed inputs, and assess property rights for tokenized assets.
Industry insiders predicted that these actions would open the door for real estate security token offers (STOs). STOs are tokens built on the blockchain that reflect ownership stakes or grant investors the right to income or dividends from physical assets.
According to Andy Mehan, chief compliance officer for APAC at American cryptocurrency exchange Gemini, the most recent declaration may bring Hong Kong’s regulations into line with those of Singapore.
He asserts that “business participants want to see consistency in the global regulatory framework because, absent it, unscrupulous actors will have the chance to take advantage of gaps in jurisdictions with less stringent laws.”
Legalizing small-scale bitcoin trading would further distinguish Hong Kong from the rest of China, where cryptocurrency trading is prohibited.
According to Adrian Wang, CEO of cryptocurrency brokerage Metapha, “this is a great move since it sends out a strong statement that Hong Kong is taking a different strategy to regulate its capital market.”