Hong Kong’s position as a future hub for crypto businesses is increasingly being noticed and discussed in relevant circles.
In a tweet, Coinbase CEO Brian Armstrong referenced the city-state to point out that the United States could lose its position as a global financial center due to the lack of crypto regulations.
Armstrong calls for settlements
“America risks losing its status as a long-term financial hub, without clear crypto regulations and a hostile environment from regulators. Congress should move quickly to pass clear legislation. Crypto is open to everyone around the world and more are on the way. EU, UK and now HK”, Armstrong saidretweeting a message saying that Hong Kong will make the sale, purchase and exchange of crypto assets legal for all its citizens from June 1.
The news that Hong Kong would allow its citizens to buy, sell and trade crypto assets is based on a speech made in January at a web3 conference by Hong Kong Financial Secretary Paul Chan.
“Hong Kong has completed the legislative work of establishing a licensing system for virtual asset service providers, and the new system will be implemented in June this year…Financial intermediaries and banks will be able to cooperate with licensed virtual asset exchanges to provide exchange services to customers, subject to compliance with relevant regulatory conditions,” Chan said at the conference.
Increased regulatory control
Brain Armstrong’s criticism of the lack of crypto regulation in the United States and the call for Congress to enact such laws comes in the wake of heightened regulatory scrutiny in the wake of FTX’s collapse.
SEC Chairman Gary Gensler has proposed new rules for crypto firms acting as qualified custodians for institutional funds. He argued that there should be a transparent mechanism to ensure that customer funds are segregated from the companies’ assets to manage their affairs.
Gensler said this was necessary to ensure customers don’t suffer in the event of bankruptcy or loss of funds through hacking. Shortly after, a Coinbase executive clarified that the company is in line with the proposals of the SEC on this subject.
Another rule uncertainty what Coinbase now has to consider is the SEC’s crackdown on staking services, calling them securities. Over the past week, the agency forced Kraken to stop its staking services offered to US clients and pay a $30 million fine for offering unregistered securities. The CEO of Coinbase might fear that this will also come for his company.
The case of Hong Kong
Hong Kong is a special administrative region of China that enjoys autonomous status in its legislative and governance matters. As China banned cryptocurrency trading and mining in its jurisdiction in 2021, Hong Kong seems to be becoming the destination for such companies with an eye on China.
The city government has taken a number of regulatory initiatives, which most jurisdictions in the world, including the United States, lack. Last December, an amendment to the current legislation brought digital assets within the scope of anti-money laundering and counter-terrorist financing laws.
It has also forced crypto firms to seek licenses before starting operations in Hong Kong. The Hong Kong Securities & Futures Commission (SFC) said in January that it release a list of highly liquid digital assets that citizens can trade.
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