Since Hong Kong is a particular niche for cryptocurrencies, its tense situation with the Chinese government has generated uncertainty in the ecosystem. The region is a global financial services hub, but many people are concerned that China will undermine its autonomy.
The government of Hong Kong has been working to regulate the cryptocurrency market in the last few weeks. In that regard, many people are worried that they will follow the same model as China.
Hong Kong Could Follow on the Same Path as China on Cryptocurrencies
It is relevant to know that Hong Kong is one of the two Special Administrative Regions (SAR) of the Republic of China. Although it is part of the Asian nation, it enjoys a higher level of autonomy than other regions.
Unlike in China, the political system of Hong Kong incorporates the separation of powers.
However, China has been seeking to tighten its control over Hong Kong in recent years. As a consequence, various companies have gone away or reduced their operations.
That region of China has also become a particular niche for cryptocurrencies. Being one of the most prominent financial ecosystems worldwide has helped it do so.
For that reason, the tense situation between Hong Kong and China has also generated uncertainty in the cryptocurrency ecosystem.
Hong Kong Government Seeks a Regulatory Framework for the Crypto Ecosystem
In early January, the Hong Kong Monetary Authority (HKMA) issued two crucial documents for the crypto ecosystem. One was about stablecoins and the other about cryptocurrency-related exchange-traded funds (ETFs).
Likewise, in early February, the government of Hong Kong revealed that it wanted to propose a licensing system for cryptocurrency exchanges.
That proposal implies that any cryptocurrency company will need a license from the Securities and Futures Commission (SFC). However, the government also proposes that licensed crypto-asset providers only provide services to professional investors.
A professional investor is one whose portfolio has at least 8 million Hong Kong dollars (HKD), equivalent to around USD 1 million.
China Seeks to Undermine the Autonomy of Hong Kong Regarding Cryptocurrencies
Recently, some professionals in the industry expressed their opinions about the regulation of cryptocurrencies in Hong Kong.
Lennix Lai, Director of crypto exchange OKX, explained that the regulatory framework for cryptocurrencies is taking shape in Hong Kong. He said that it was consistent with the status as a global financial services hub of that region.
However, many people are concerned that China seeks to undermine the autonomy of Hong Kong.
In 2021, the Chinese government declared all activities involving cryptocurrencies illegal. Following that announcement, uncertainty spread throughout the crypto sector of Hong Kong.
In that way, the question arises about what the future of cryptocurrencies will be like in Hong Kong. There is particular uncertainty about cryptocurrency-related service providers such as exchanges and ETFs.
Cryptocurrencies like Bitcoin play a relevant role in the economy, which regulators from different countries do not overlook. For example, China is against any activity related to decentralized crypto assets, which led them to create their central bank digital currency (CBDC).
By Alexander Salazar
