Hong Kong will maintain its cautious approach to digital assets amid the collapse of the FTX exchange, the city-state’s Financial Secretary, Paul Chan, has stated. Chan noted that the FTX saga only enforces Hong Kong’s long-held view that the industry needs more transparency and oversight.
FTX, which filed for Chapter 11 bankruptcy last week following the quick unraveling of its shady inner workings, was founded in Hong Kong in 2019. It remains on the city-state’s corporate registry despite moving its headquarters to the Bahamas in 2021. The exchange has several clients in Hong Kong, many of whose funds are now stuck on the exchange.
The Financial Secretary of Hong Kong said that because of the bankruptcy of FTX, transparency and proper supervision must be strengthened. Hong Kong just made a manifesto to welcome cryptocurrency companies around the world. https://t.co/w9nFTAQhuN
— Wu Blockchain (@WuBlockchain) November 13, 2022
Despite this crash, Chan pointed out that the city is still welcoming VASPs and is focused on being the global digital asset hub. In his blog post, the financial secretary noted that the Hong Kong government recently issued the “Policy Declaration on the Development of Virtual Assets in Hong Kong,” a regulatory framework for the industry. The framework is the government’s commitment to continue facilitating the development of the virtual asset industry, Chan stated.
The framework is in line with Hong Kong’s risk-based regulatory approach to the industry, which has created a favorable environment for developing the digital asset industry, he added.
“…this policy declaration demonstrates our determination and commitment to explore financial innovation together with the industry, and also clearly states our position: while actively embracing innovation, there must be appropriate regulatory support that keeps pace with the times,” Chan remarked.
Ironically, SBF was in favor of the new regulatory framework. “I think [Hong Kong] could regain that status. When you look at the East, it’s not obvious, and I think that there is a real opening and real room there,” he stated, speaking virtually on October 31.
At a time when sentiment towards digital assets has soured, Chan noted that the collapse of a few players shouldn’t take away from the impact the technology can have. Drawing parallels with the 2000s bursting of the internet bubble; he pointed out that while billions of dollars were wiped out, the internet still became a critical technology. Digital assets and blockchain will likely follow a similar path, he believes.
While Hong Kong commits to continue being friendly to digital asset companies, other regulators are taking a keener look at the industry. In the U.S., the SEC and CFTC are reportedly probing FTX, while the Bahamas has launched criminal misconduct investigations into the exchange. Even the White House is getting involved, with Bloomberg reporting that the highest office in the U.S. is monitoring the situation.
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