The CEO of Hong Kong’s Securities and Futures Commission (SFC), Julia Leung Fung-yee, highlighted the significance of crypto trading in the virtual asset ecosystem during a recent speech. She stressed that incorporating virtual assets into the regulatory system was crucial after the collapse of crypto exchange FTX. The new licensing system for virtual asset providers ensures investor protection while taking into account the risks faced by financial institutions.
Hong Kong used the FTX collapse to reduce regulatory risks associated with centralized exchanges and included virtual asset service providers in the same legislation that governs traditional financial institutions.
The new rules bring strict AML guidelines and investor protection laws to virtual exchanges looking to do business in Hong Kong. It also introduces a new licensing scheme that allows retail investors to trade in virtual assets. Hong Kong’s cryptocurrency licensing system is a good example of China’s “one country, two systems” policy as cryptocurrencies are banned in Mainland China since 2021, while Hong Kong promotes a welcoming environment for crypto businesses. Over the past year, more than 150 Web3 firms have established operations in Hong Kong’s Cyberport, a digital hub created by the local government to promote innovation.