Hong Kong Plans to Seize Crypto Lead in Southeast Asia

Hong Kong is committed to becoming a global cryptocurrency hub despite challenges presented by the market and rivals.

Hong Kong officially unveiled its new approach to cryptocurrencies during its Fintech week late last year, which highlighted Web3 integration. Soon after, authorities allowed the listing of Hong Kong’s first crypto-based exchange-traded fund, which has since raised over $80 million.

Then, Hong Kong’s Securities and Futures Commission announced that retail investors would be able to trade “highly liquid” digital assets. This development, as well as a mandatory exchange licensing regime, is expected from June this year. The authorities have also scheduled a consultation for this quarter on which assets will be allowed for retail investors.

The authorities have also expressed a desire to review the property rights of tokenized assets and the legality behind the execution of smart contracts. Yet, despite these efforts, Hong Kong still has its work cut out for it in achieving its crypto ambitions.

Hong Kong returning to form

These ambitions represent more of a return to form, as Hong Kong served as a crypto hub in the digital asset’s earlier years. Sam Bankman-Fried’s FTX and Alameda Research have their roots in the city, while Binance One maintains a base there. However, due to increased regulation and increasing signs of restriction, many firms eventually decided to leave.

Initially, the authorities decided to significantly raise regulatory standards, restricting crypto exchange access to those with a portfolio of at least HK$8 million ($1 million). Once China largely bans crypto in 2021, the city also lost its appeal as a mainland outlet. Repressive coronavirus policies instituted by an increasingly authoritarian Beijing have also led to a significant brain drain from the city.

However, the fear of greater Chinese intrusion is one of the challenges facing Hong Kong. Trading volume in Hong Kong grew less than 10% in the 12 months to June from a year earlier as digital asset prices plummeted last year. It also faces constant competition from nearby Singapore.

singapore rivalry

Singapore, a long-time rival financial hub in Southeast Asia, is also trying to become a global cryptocurrency hub. When Hong Kong announced its crypto plans during its Fintech week last year, Singapore held its own on overlapping dates. The Monetary Authority of Singapore (MAS) also introduced crypto regulation proposals late last year.

A company’s current conundrum illustrates the challenge posed by choosing between two alternatives. Based in Singapore, crypto lender Matrixport Technologies is currently awaiting the outcome of its virtual asset license application. However, it may decide to move there before its application is resolved, depending on the developments observed in Hong Kong.