Hong Kong’s securities watchdog has reiterated its plans to tighten the screws for digital currency platforms in the region to protect investors from losses.
Head of the Hong Kong Securities and Futures Commission (SFC) Julia Leung remarked that digital currency platforms are integral to the blockchain industry, requiring tighter regulations. Leung made the comments at the Boao Forum for Asia 2023 held in China with finance ministers across the continent in attendance.
“The cryptocurrency platform is part of the entire Web 3.0 ecosystem and is supportive of the development of the entire internet ecology,” Leung said. “These virtual currency platforms must protect the safety of all investors from the perspective of investor protection.”
Leung’s comments follow Hong Kong’s plans to transform its digital economy by attracting international firms to the region. Since the announcement, nearly 100 companies have indicated an interest in building blockchain-based businesses in the country, with eight firms on course to receive licenses before the end of the year.
Hong Kong’s decision to trigger growth in the ecosystem has led regulators to allow retail investors to trade digital currencies like BTC and Ethereum (ETH). Retail investors will only be allowed to trade digital currencies on exchanges licensed by the SFC.
Exchanges seeking the SFC’s approval are expected to ensure the clear separation of clients’ funds, regular security audits, and proper disclosures to the regulatory bodies. Despite Leung’s stance, the People’s Bank of China (PBoC) Deputy Governor Xuan Changneng stated that China would maintain its blanket ban on digital currencies, given the paucity of global regulations.
Xuan cited the failures of FTX, Celsius, and Three Arrows Capital (3AC) as proof of the inherent risks digital currencies pose to investors. However, the PBoC Deputy Governor noted that stablecoins offer a range of benefits for cross-border payments but still remind the dangers of illegal trading percolate underneath.
Chinese banks are eyeing Hong Kong’s Web 3 ambitions
Chinese banks and financial institutions are reportedly approaching digital currency firms looking to set up offices in Hong Kong to offer them banking services. Several banks, including the Bank of China, Bank of Communications, and Shanghai Pudong Development Bank, were named as banks leading the charge.
“This development is encouraging for both the industry and the broader ecosystem, as it demonstrates a maturing understanding of the crypto sector by traditional financial institutions,” OSL head of banking relations Julia Pang said.
Aside from merely sending emails and attending industry-related events, some Chinese banks have sent representatives to digital currency firms as the mad dash for new clientele heats up.
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