Hong Kong Set to Unveil New Crypto Framework, Allowing Retail Investors to Trade Certain Digital Currencies

Hong Kong's Securities Futures Commission (SFC) plans to release guidelines on the licensing regime for cryptocurrency exchanges next month. SFC CEO Julia Leung announced the plan during an event and noted that the city will unveil its new cryptocurrency framework in May. In February, the SFC published a consultation paper on its proposed regulatory regime for crypto trading platforms, which has garnered over 150 responses. A new licensing regime for crypto platforms will come into effect in June, allowing retail investors to trade certain digital currencies, provided safeguards such as knowledge tests, risk profiles, and reasonable limits on exposure are put in place. The SFC did not specify which large-cap tokens would be allowed, but a report by the FT claimed Bitcoin and Ethereum would be opened up to retail customers.

Licensed trading platforms such as OSL and Hashkey Group have already begun offering crypto-related services to investors in Hong Kong under the SFC's supervision. The duo has become the first crypto exchanges in the city to receive licenses from the SFC and enjoys crypto-to-fiat conversion services from ZA Bank, the largest online-only bank in Hong Kong. The bank allows users of the trading platforms to withdraw crypto deposits in US dollars, Hong Kong dollars, and Chinese yuan. "For the dozen of interested firms, big or small, from abroad and local, top of their concern is to have a path to make things work," ZA Bank CEO Ronald Iu said earlier this month. The CEO added that ZA Bank would also provide the same service for more crypto platforms in the city as they obtain their licenses.

Hong Kong's new crypto regime comes as the city has been aggressively pursuing its Web3 and blockchain push to position itself as a hub for digital innovation in Asia. The city has also seen significant interest from crypto firms in the wake of a regulatory crackdown on crypto in the US. Hong Kong's Secretary for Financial Services and the Treasury, Christian Hui, said last month that more than 80 companies working in the digital asset space had shown interest in establishing a presence in the city since October 2022. More recently, Hong Kong's Financial Secretary, Paul Chan, reiterated the city's crypto hub ambitions, claiming that it is the "right time" for the city to push for Web3 despite the recent market volatility.