© Courtesy of CryptopolitanHong Kong is preparing to implement new regulations that will legalize retail cryptocurrency trading in the city. This move is part of its planned strategy to become a global cryptocurrency hub. The initiative, which is supposed to start in March next year, provides for the compulsory licensing of cryptocurrency platforms.
Hong Kong is set to become the next crypto center in the world
Hong Kong is trying to reclaim its position as a hotspot for crypto entrepreneurs after Covid-19, political turmoil and regulations tarnished the city's image.
With Hong Kong regaining its place as a global financial power, it contrasts with mainland China, where cryptocurrencies have been banned. Hong Kong's financial and legal system differs from that of mainland China. This separate administration is one of the components of the state system, two systems that govern it.
The idea of bringing Hong Kong back to the top of the list of cryptocurrency investors has been on the market for some time. Elizabeth Wong, chief financial technology officer at the Securities and Futures Commission (SFC), last week hinted at plans to allow regular traders to trade digital assets again. He told the event that the government is in the process of drafting its own bill to regulate cryptocurrency.
Hong Kong initially attracted some of the world's largest cryptocurrency exchanges, including Sam Bankman's $1 billion FTX. However, in 2021, Bankman-Fried moved the FTX headquarters from the city to the Bahamas. The crypto.com exchange moved to Singapore in the same year after China's ban on trading digital assets sparked fears that Hong Kong might do the same.
Also, if passed, the anti-money laundering bill sent to the Hong Kong legislature could create a new licensing system for digital assets. The Supreme Council of Meteorology believes that this regulatory framework will facilitate the orderly and sustainable growth of the sector while protecting investors.
The licensing scheme for cryptocurrency platforms is expected to start in March 2023. The regulator primarily wants to allow the trading of major tokens, but details are not yet available. First, the concept will be put up for public review.
What does this mean for the Chinese cryptocurrency market?
Cryptocurrency exchanges like Crypto.com and Huobi have moved from Hong Kong to Singapore, causing competitors to lose out. In response to a warning from the Monetary Authority of Singapore about the high risks of investing in cryptocurrencies, exchanges have been banned from promoting certain tactics.
However, Singapore has announced its goal of becoming a hub for the financial industry based on Web3 and Blockchain. Hong Kong's apparent tightening of crypto laws may be an attempt to stem the flow of business to its rival financial hub, Singapore.
There are concerns about how a relaxed approach to Hong Kong will affect industry in China. Bitmex co-founder Arthur Hayes argues that Hong Kong's attractiveness to crypto companies depends on their access to Chinese consumers.
Hayes raised concerns about how China could use its influence in Hong Kong to undermine any pro-crypto regime.
Bloomberg reported that experts are concerned that the current measures in Hong Kong are not enough. Even if retail customers could trade, platforms licensed from the city would be less competitive than those operating in a more favorable regulatory environment.
According to data collected from Hong Kong, Hong Kong recorded the lowest growth in crypto transactions in East Asia at 9.5%. During the same period, Japan increased by 113% and Mongolia by 72%.
In a study published by Forex Suggest in July 2022, many variables, including cryptocurrency structures, pro-crypto policies, and startup culture, showed that Hong Kong is the country most willing to adopt traditional cryptocurrency.
Cities that position themselves as coding hubs
Switzerland has always been a destination for those who want to amass a great fortune. The Swiss banking system often welcomes these people or companies with open arms. However, the country is now exploring emerging financial markets. With the expansion of the crypto financial sector, many startups are aiming to become their hubs in major Swiss cities.
Moreover, Singapore is on its way to becoming the crypto hub in Asia. In contrast to social conservatism, Singapore is known for its openness to financial innovation. City and state officials not only highlighted the potential benefits of cryptocurrency, but also passed legislation to support the situation.
Dubai and Abu Dhabi are also fighting over cryptocurrencies. The UAE positions itself as a leading global hub in the field of cryptography. During the crypto winter, the region witnessed a remarkable development in the crypto space, making it an attractive destination for cryptocurrency investors and developers.
Finally, many cities are at the fore in virtual currency adoption. These cities include San Francisco, Vancouver, Amsterdam, Tel Aviv, Ljubljana, Slovenia, and Miami, Florida. In addition, global cities such as New York, London, Portsmouth, New Hampshire, Zonte and El Salvador dominate the cryptocurrency market.
Countries experiencing economic and currency instability, such as Venezuela and Zimbabwe, are increasingly dependent on bitcoin and other cryptocurrencies.