Mainland China’s trade authorities are keeping an eye on Hong Kong’s crypto regulations as it pushes to become a regional crypto hub.
According to the report, the prospect of allowing retail trading on the city’s two licensed exchanges, HashKey and OSL, has attracted Chinese companies and banks.
Hong Kong sees an influx of Chinese business
It is reported that business owners in mainland China participated in five days of talks. This included discussions with venture capitalists, incubator program directors and representatives of the government’s foreign investment agency.
Hong Kong currently only allows professionals to transact in cryptocurrency. But the proposed crypto regulations would enable citywide retail trading of digital assets. This anticipation has led to a sudden increase in inquiries from Chinese business owners.
Since the domestic securities regulator decided to loosen regulations in October, there has been a favorable response. Industry sources inform the publication that they plan to expand their business and file for a license in Hong Kong.
Joshua Chu, a Hong Kong-based crypto lawyer, told Nikkei Asia that he thought Beijing was treating Hong Kong as a Web3 test market. “Hong Kong is likely to lead the way and become a test bed,” he added.
Chu said, “China will likely build on the Hong Kong experience and roll out with Chinese characteristics for the mainland.”
Mainland Officials Part of Crypto Events
The paper reports that local government officials from Nanjing and Hangzhou have participated in Web3 programs to “learn and observe”.
Senior executives from mainland banks were among the Web3 guests, according to a list of participants seen by the paper. Officials from China Merchants Asset Management Hong Kong, China Construction Bank International, Industrial Bank and Commercial Bank of China were part of the events. According to sources, representatives of Chinese institutions were also there.
China Merchants Bank’s asset management division, Shanghai Pudong Development Bank, and Chinese conglomerate Fosun Wealth’s investment banking and securities division are among the financial institutions that have shown interest in Hong Kong cryptocurrency projects, according to people in the know.
According to a source at the paper, “If it’s open to retail, they’re interested, if it’s only available to professional investors, not so much.”
Businesses who spoke with CNBC agreed.
Justin D’Anethan, Director of Institutional Sales at Ember Group, said,
“If anything, China may see an impact on Hong Kong following those regulations, the release of new crypto-linked products or blockchain-based solutions, and the pick-up of trade and business activity that may ensue. “
However, there is likely to be an identity crisis for Chinese businesses.
The paper was informed by a senior executive of a Hong Kong-based securities company that it would not aggressively market to customers who only have mainland IDs. However, the circumstances would be different if the customer has a Hong Kong ID.
Problems increased after the bank collapse
Crypto businesses in Hong Kong are facing difficulties following the closure of crypto-friendly banks Silvergate Bank and Signature Bank.
According to the South China Morning Post news based on sources, local banks are hesitant to work with them. Therefore, cryptocurrency businesses have a hard time opening local accounts. Meanwhile, they are looking for more suitable domestic and overseas banking partners.
Therefore, it is still challenging for many crypto companies to open local bank accounts.
According to Joy Lam, a partner at Baker McKenzie in Hong Kong, the territory does not prohibit local banks from working with crypto businesses. But the Hong Kong Monetary Authority requires banks to conduct due diligence and ongoing monitoring of these customers.
Meanwhile, Hong Kong is planning to implement new crypto regulations in June. After that, all retail traders can buy, sell and trade cryptocurrencies without any restrictions.
Meanwhile, the sector is set to implement the new rules in June. After which, it will officially make crypto buying, selling and trading completely legal for all its citizens. This also includes mainland Chinese institutions. However, the Securities and Futures Commission must license cryptocurrency trading sites.
In its plan to regulate trading platforms for virtual assets, the commission has started a consultation process.
disclaimer
BeInCrypto has reached out to the company or individual involved in the story for an official statement regarding the recent developments, but has not yet received a response.