Hong Kong’s crypto rules help it fit in more than stand out, but experts say that’s good
- Hong Kong’s virtual asset regulations effective this month are closely aligned with global standards, and some rules are even more stringent
- From Singapore to Europe, new rules are coalescing around something resembling global standards for the industry, with the US being the odd one out
With its new cryptocurrency rules now in effect, Hong Kong’s strategy to become a global virtual asset hub looks less like trying to stand out than trying to fit in.
Experts say the city’s rules align with global trends, with some being even more restrictive. Hong Kong exchanges must store private keys on shore, for example, and 98 per cent of customer funds must be kept in what are called cold wallets, which are stored offline for security. In Japan, the cold storage requirement is 95 per cent of funds, said Chengyi Ong, head of APAC policy at Chainalysis, a blockchain analytics firm.
“The Hong Kong regulations are granular and, in some ways, more stringent than those in other markets,” Ong said by email. “These requirements will entail operational costs for exchanges, but it speaks to the type of players that Hong Kong is looking to attract, which are those with the resources and commitment to meet high compliance standards.”
While different markets have their own approach to defining virtual assets and deciding which ones constitute securities, the broad strokes of modern crypto legislation look similar.
“Broadly speaking, the new regime is very much in line with international trends on digital asset regulation,” Ong told the Post this week in the Inside China podcast. “We’re seeing this move towards comprehensive frameworks covering prudential soundness, market conduct and consumer protection.”
A big consideration for Hong Kong in adhering to existing standards is its position in the global financial system, according to Vince Turcotte, director of digital assets at Eventus, a global trade monitoring software company.
“It’s very important, as everybody knows, for Hong Kong to maintain its stature as a global financial centre,” said Turcotte, who is based in the city. “Yes, we’re the entrepôt to China, but at the same time, we are a legitimate global financial centre, whether it’s the HKEX or any of the other trade-oriented businesses that take place here.”