Hong Kong officials reiterate commitment to cryptocurrency, DeFi regulation at Web3 Festival
- Financial Secretary Paul Chan says financial system must be protected in Web3, while SFC official says DeFi platforms may require a licence
- Web3 Festival is largest since city since committed to becoming a virtual asset hub, attracting speakers such as Binance CEO Zhao Changpeng
“The premise of Web3 development is that the stability of the financial system and investor protection should not be damaged,” Chan said in his speech. “I believe that everybody has learned from recent events that appropriate regulations are a must to create a sustainable development environment and a more ideal space for development.”
Some attendees of the conference – the largest Web3 event the city has hosted since declaring its intention last year to become a digital asset hub – were surprised to learn that the Securities and Futures Commission (SFC) believes DeFi platforms for virtual assets need a licence under existing rules. Without any central authority, decentralised services have typically been seen as less susceptible to government oversight.
“The SFC views DeFi activity through the same regulatory framework that applies to financial activities regulated by the SFC,” said Keith Choy, interim head of the intermediaries division at the SFC. “As such, as long as DeFi activity holds within the scope of securities and futures, it would be subject to the same regulatory requirements applicable to traditional financial activity.”
People “operating or performing” DeFi activities should be subject to Hong Kong’s licensing requirements, added Choy, noting that “providing automated trading services” is a regulated activity whether decentralised or not.