Crypto Firms Look to Hong Kong Amid Tough US Regulations, Says Fintech Association Chair

June 20, 2023

By Sharan Kaur Phillora

Hong Kong is becoming an attractive destination for cryptocurrency firms seeking friendlier jurisdictions due to challenging regulatory conditions in the United States, according to Neil Tan, chairman of the FinTech Association of Hong Kong. The city’s strategic position as a gateway to China and its robust access to capital is bolstering its ambitions to become a leader in the virtual assets arena, despite facing stiff competition from Dubai and Singapore.

Here’s what we know:

In an interview with Forkast, Tan discussed how the comprehensive rules set by Hong Kong’s Securities and Futures Commission, including retail trading facilitation with investor protection, have become major attractions for these firms.

Hong Kong is actively positioning itself as a virtual asset hub, unlike other jurisdictions that are pulling back on retail investor access. Tan emphasized the city’s commitment to investor protection within the new regulatory framework and highlighted that Hong Kong’s proactive approach indicates its future direction as a virtual asset hub.

He says that Hong Kong learned a lesson from its previous regulatory approach when it restricted crypto access to accredited and professional investors, reducing the size of the market. This approach aimed to avoid issues experienced by other jurisdictions with companies like FTX, Celsius, Three Arrows Capital, and Terraform Labs.

Although crypto is banned in China, Hong Kong serves as a sandbox where it is legal and acts as an access point for cross-border activity. Tan noted that this approach seems to have China’s approval, making it well-received in the region.

Hong Kong is piloting its central bank-backed digital currency, e-HKD, with prominent partners such as Alipay, Bank of China, Visa, and Ripple Labs. The city is exploring use cases for smart contracts, tokenized deposits, and tokenized assets, including a partnership with Fubon Bank to tokenize real estate.

While competition among jurisdictions like Dubai, Singapore, and London is heating up, Tan believes there won’t be a single winner in the race to become the next Web3 leader. 

He emphasized the importance of regulatory arbitrage and Hong Kong’s unique advantages, including its status as an international financial center, public and private sector support, and global champions like Animoca Brands.

Hong Kong’s comprehensive regulations, financial infrastructure, and government support position the city as an attractive destination for crypto firms seeking a favorable environment amid tough regulations elsewhere.

About the author

Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.

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