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Year in review: How Hong Kong’s crypto policy U-turn injected optimism into a tumultuous 2022
- The implosion of stablecoins TerraUSD and Luna, followed by the demise of FTX, have shaken investor confidence globally this year
- But a policy pivot by the Hong Kong government and a relaxation of Covid controls are expected to draw crypto businesses to the city in 2023
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The year 2022 started off very differently from how it ended for Hong Kong’s crypto industry.
Commuters in the city’s business and financial hub of Central, returning to work on the first days of the new year, were greeted by giant billboards in prime advertising spots, featuring cartoon apes in Christmas hats promoting one of Hong Kong’s latest obsessions: non-fungible tokens (NFTs).
Cryptocurrency prices had soared to new heights after years of easy monetary policies. Countless NFT projects had sprung up across the city, and crypto enthusiasts, luxury watch collectors, retail investors and companies alike had been snapping up cartoon avatars, digital artworks and virtual land plots costing millions of dollars, hoping for either a quick windfall or long-term gains once virtual assets become mainstream.
By the end of the year, however, NFT prices have crashed. The implosion in May of TerraUSD and Luna – cryptocurrencies known as stablecoins whose values are pegged to the US dollar – followed by the demise of FTX – previously the world’s second-largest crypto exchange – have rocked public perception of the industry.
While venture investors in Hong Kong seem to have largely dodged the bullet, several cryptocurrency trading firms with roots in the city ran into trouble.
Hundreds of retail investors in the city, said to be suffering losses totalling HK$98 million (US$11.5 million) from the recent collapse of local cryptocurrency exchange AAX, demanded regulatory actions, leading to the arrest of two executives last week.
“2022 has been a tumultuous year for digital assets globally,” said Joy Lam, a partner at law firm Baker McKenzie in Hong Kong. “We’ve seen several high-profile incidents that have rattled investor confidence and shone a searing light on aspects of the nascent industry which need to be addressed quickly and decisively.”
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