Hong Kong legislator Johnny Ng has made a public invitation to Coinbase and other crypto exchanges to establish official operations in the city state amid hostility from US regulators. The offer comes after the US Securities and Exchange Commission (SEC) brought lawsuits against two major cryptocurrency platforms, Binance and Coinbase last week. The SEC is suing Coinbase for securities violations as well as failing to register as a broker dealer, and Binance for similar alleged violations, market manipulations, and commingling user funds, among other charges.
Many observers predict that the crackdown on crypto exchanges in the US will lead to a shift in trading volume and innovation towards jurisdictions with more favorable regulations. Hong Kong, with its recent crypto-friendly stance, could potentially benefit from this development. The Securities and Futures Commission (SFC) of Hong Kong has just begun accepting applications for licenses from crypto trading platforms, lifting a ban imposed in late 2020.
The SFC has established clear guidelines for platform operators, such as requiring them to hold liquid assets worth 12 months of operating expenses (excluding virtual assets) as one of the necessities to obtain a license. Crypto firms including Huobi, Gate Group, Amber Group, OKX, and BitMEX, have already expressed interest in applying for a license in Hong Kong.
However, only around 10 registered fund managers in Hong Kong had converted their licenses to handle crypto for their clients by late April, which signifies a slow adoption rate. Nevertheless, Markus Thielen, Matrixport’s head of research, believes that Hong Kong’s plans to become Asia’s main crypto hub could work out, with a gold rush of international crypto firms serving the city’s high-net-worth retail investors.
Prior to the lawsuits by the SEC, Hong Kong already had the potential to become a crypto hub, given its strong financial infrastructure and deep pool of capital. With the recent developments in the US, cryptocurrency exchanges may see Hong Kong as an even more attractive destination. As the city remains open to retail crypto trading, its support for the industry could attract more attention from global operators.
In conclusion, the invitation extended to Coinbase and other exchanges in light of the SEC crackdown illustrates Hong Kong’s willingness to capitalize on the possible shift in trading volume and innovation. Hong Kong’s favorable regulations and strong financial ecosystem may prove beneficial for the city as well as the global crypto industry. However, potential risks and challenges also need to be considered, including the slow adoption rate among registered fund managers and the ongoing skepticism about cryptocurrencies.
Source: Blockworks
