Hong Kong has proposed allowing retail investors to trade cryptocurrencies and exchange-traded funds, and plans to trial NFTs and CBDCs as it seeks to regain its status as a global financial center.
Last year, the city proposed restricting cryptocurrency trading to professional investors, prompting many crypto entrepreneurs to move to friendlier jurisdictions such as Dubai and Singapore.
The announcement states that Hong Kong will consider holding tokenized assets and will explore the possibility of legalizing smart contracts “to provide a solid legal basis for their development.”
He plans to introduce "appropriate legislation" on aspects such as the "governance, stability and redemption mechanisms" of stablecoins.
The proposal comes at a time when China has stepped up its efforts to crack down on crypto transactions and Singapore is exploring a set of stricter rules on virtual digital assets.
“We want to bring our political stance to the global market to demonstrate our determination to explore fintech with the global virtual asset community,” said Hong Kong Finance Minister Paul Chan. Initially, Hong Kong expects the underlying assets to be "limited to bitcoin and ethereum futures on the Chicago Mercantile Exchange," he added.
Hong Kong also describes the approach it intends to take in its policy statement. He said the Securities and Futures Commission will hold a public consultation on how retail investors can get "the right level" of access to virtual assets under the new licensing regime.
“We understand that virtual assets [virtual assets] are here to stay, let alone future opportunities that will evolve in the form of Web 3.0 and the Metaverse as they have captured the attention of global investors and are increasingly seen as a vehicle for financial innovation. "Virtual Assets," the Bureau of Financial Services and Treasury said.
“The government, together with financial regulators, is working to create an enabling environment for the sustainable and responsible development of the virtual asset sector in Hong Kong.”
Sam Bankman-Fried, chief executive of cryptocurrency exchange FTX and a prominent industry advocate, called Hong Kong's move today "very promising" but added that the region would have taken the position last year, citing aggressive capital outflows from Hong Kong. Previous proposals have been requested.
“I really appreciate it when politicians communicate constructively and optimistically with the people who matter most to the industry: consumers,” he tweeted.
In a statement on Monday, Hong Kong said it would conduct pilot projects to test the technological advantages of virtual assets and their application in financial markets. These pilot projects include the issuance of NFTs, green bond tokenization, and “the potential introduction of a retail central bank digital currency, eHKD.”
Over the past six months, Hong Kong, Singapore and Dubai have attracted cryptocurrency entrepreneurs, investors and technologists from all over the world with their cryptocurrency-friendly attitude. But over the past few quarters, they've struggled with how much they want to stay open.
Last week, Singapore proposed new rules that will soon require retail investors to pass a test and not use credit card payments and other forms of lending to trade cryptocurrencies.
The Monetary Authority of Singapore said in a series of advisory papers that it is concerned that many retail customers may not have "adequate knowledge of the risks of trading" digital payment tokens, which could lead them to "take on more risk than other". otherwise might want or be able to bear.
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