Hong Kong’s ambition to become a crypto hub may not be sustainable, according to a Chinese crypto veteran whose digital asset business in China was overturned by a regulatory crackdown.
In an interview with Bloomberg, crypto pioneer Bobby Lee, who set up China’s first Bitcoin exchange and founded US-based crypto storage provider Ballet Global, warned that Hong Kong may once again change its stance toward crypto in three to five years and announce a ban on the industry.
The statement comes as Hong Kong is set to issue crypto exchange licenses starting next month.
Lee claimed that officials who let exchanges obtain a license may have overblown expectations for connecting with mainland China as digital asset trading remains banned in China.
“The fantasy for exchanges is thinking that if officials let us get a license, then maybe they’ll start a sort of crypto-connect trading link with mainland China.”
He added that he is not blaming the Hong Kong government and that in the grander scheme of things. “Hong Kong itself is a drop in the bucket,” he said.
Hong Kong’s New Regulatory Regime to Take Effect Starting June 1
Hong Kong’s securities watchdog has concluded its consultation paper on the proposed regulatory regime for crypto trading platforms, which is set to take effect starting in June.
Under the new rulebook, the city-state will allow retail investors in the city to trade specific “large-cap tokens” on licensed exchanges, given that safeguards such as knowledge tests, risk profiles, and reasonable exposure limits are put in place.
The agency will also start providing licenses to crypto exchanges.
However, it noted that the licensed platforms should “comply with a range of robust investor protection measures covering onboarding, governance, disclosure and token due diligence and admission, before providing trading services to retail investors.”
The pivot to woo crypto firms is ostensibly Beijing-backed.
Meanwhile, the new licensing regime is still vague on how to treat crypto derivatives, cryptocurrencies used for gaming, and utility coins.
The gray areas as well as concerns around the sustainability of the new regulatory framework remain a major concern.
“It’s difficult for businesses to have a five-year regulatory road map,” said Lucy Gazmararian, founder of web3 venture fund Token Bay Capital.
“Have it in the back of your mind, but really plan for one to two years ahead — because look what happened in the US with the crackdown on the sector.”
Hong Kong was formerly a digital-asset hub but started to lose its position in mid-2022 amid increasing concern about the city’s regulatory ambiguity on crypto and the emergence of potential rivals like Singapore and Dubai that are considered more friendly to the crypto industry.
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