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Hong Kong plans to implement new rules that will allow retail cryptocurrency trading there. The action is a deliberate step in a plan to establish a global crypto hub. The initiative, which is slated to go into effect in March of next year, will reportedly require bitcoin platforms to have licenses.

Hong Kong is set to become the world’s next crypto hub.

After Covid-19, political turmoil, and legislation tarnished the city’s reputation as a hub for cryptocurrency entrepreneurs, Hong Kong is making an effort to restore that standing.

In contrast to mainland China, where cryptocurrencies are not allowed, Hong Kong is once again a worldwide financial powerhouse.

The legal and financial systems of Hong Kong are different from those of the Chinese mainland. The “One Country, Two Systems” system that governs it includes this distinct form of government.

For some time, there has been talking in the industry about moving Hong Kong back to the top of the list for cryptocurrency investors.

Elizabeth Wong, head of the Securities and Futures Commission’s (SFC) fintech division, suggested a strategy to reintroduce trading in digital assets by regular traders last week.

At a gathering, she said that the government was working on a measure to regulate cryptocurrencies.

Some of the biggest cryptocurrency exchanges in the world, including Sam Bankman’s billion-dollar FTX, were initially drawn to Hong Kong. Bankman-Fried moved the FTX headquarters from the city to the Bahamas in 2021.

The Crypto.com exchange relocated to Singapore over worries that Hong Kong would follow China in banning the trade of digital assets in the same year.

A proposal against money laundering submitted to the Legislative Council of Hong Kong may also create a new licensing system for digital assets if it is approved.

According to SFC, this regulatory framework would support the industry’s steady and orderly growth while safeguarding investors.

Does this have any impact on China’s crypto market?

The licensing mechanism for bitcoin platforms is expected to start in March 2023. Specifics still need to be disclosed, but the regulator expects to allow trading primarily on the more valuable tokens. The idea will initially be made available for public comment.

Singapore nevertheless stated that it wanted to become a hub for the blockchain- and web-3-based finance business. The apparent change in Hong Kong’s cryptocurrency laws may be an effort to stop businesses from going to Singapore, a rival financial hub.

There are still questions about how a laxer policy in Hong Kong will impact the sector in mainland China. Co-founder of BitMEX Arthur Hayes contends that Hong Kong’s appeal to cryptocurrency companies hinges on its ease of access to Chinese consumers.

Hayes also expressed alarm over the possibility that China will use its sway over Hong Kong to thwart any pro-crypto legislation.

According to Bloomberg, experts are worried that Hong Kong’s current actions might not be enough. Even if retail consumers are allowed to transact, licensed platforms operating in the city will be less competitive than those doing so in more benevolent regulatory environments.

Hong Kong experienced the smallest rise in the volume of cryptocurrency transactions in the East Asian area, at 9.5%, according to data provided by Chainalysis Inc. While Mongolia recorded a growth of 72%, Japan experienced a gain of 113%.

According to a Forex Suggest study from July 2022, Hong Kong was the country best prepared for the widespread use of cryptocurrencies in terms of factors like crypto ATM installations, pro-cryptocurrency laws, and startup culture.

Conclusion 

Hong Kong is making a change to become a more welcoming destination for cryptocurrency. By March of the following year, it intends to legalize retail trading and encourage licensing of cryptocurrency platforms.

The following week, financial technology conferences will be held in Singapore and Hong Kong. High-profile crypto veterans will be present, including FTX CEO Sam Bankman-Fried and Binance CEO Changpeng Zhao.