Hong Kong proposes plan for retail access to crypto

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Hong Kong has thrown down the gauntlet in its race with regional rival Singapore to become a digital asset hub, with the city-state putting forward a proposal to enable retail access to cryptocurrency.

According to a consultation paper released Monday by the Hong Kong Securities and Futures Commission (SFC), retail investors will be able to access the two biggest crypto tokens – Bitcoin and Ethereum. However, retail clients are required to pass a knowledge assessment or are only offered access after training. The SFC also requires all digital asset trading platforms operating in Hong Kong or actively promoting to Hong Kong-based investors to obtain a license from the SFC.

Read more: Banks rally for Hong Kong sale of tokenized greenbacks

The plan, which will be offered for a period of six weeks to receive feedback from “interested parties”, also stipulates that only 2% of client funds can be kept in “hot wallets”.

The latest developments come after the SFC announced last month that only assets with “significant liquidity” will be made available to retail investors.

“Some virtual asset platforms offer more than 2,000 products, but we do not plan to allow retail investors to trade them all. We will set the criteria that will allow retail investors to [only] trading in major virtual assets,” said Julia Leung, the new CEO of the Securities and Futures Commission (SFC).

Push to hub status

Despite its strong stance against retailer participation in the space, Singapore was generally seen as more progressive compared to its North Asian rival when it comes to the digital asset sector.

However, it looks like HK is now at the forefront, with regulators laying out clear plans for the development of its digital asset space for both institutions and retail customers, while maintaining its strong stance on investor protection.

“This is part of a major effort by Hong Kong regulators to issue clear and coordinated guidelines on how centralized virtual asset trading platforms should operate,” said Patricia Ho, assistant general counsel at OKX.

Highlighting the “recent turmoil and collapse of some of the world’s leading crypto trading platforms,” ​​Leung said protecting and regulating investors remains a priority.

“As has been our philosophy since 2018, our proposed requirements for virtual asset trading platforms include robust measures to protect investors, in line with the principle ‘same company, same risks, same rules,'” said Leung in the consultation document.

Hong Kong’s recent regulatory developments have been seen by the industry as a welcoming hand, with institutional and retail crypto firms eager to set up shop in the city-state.

Last week, DBS, Southeast Asia’s largest bank, announced that it was seeking the license that would allow it to offer crypto trading to Hong Kong clients.

Read more: Crypto Hub Race Heats Up as DBS Prepares Hong Kong Digital Asset License Application

Meanwhile, Tron founder and Huobi advisor Justin Sun said that Huobi Global is applying for a Hong Kong crypto trading license.

With the new license, Huobi will be able to expand its services and offerings to Hong Kong clients, offering a wider range of crypto trading and investing options.

— HE Justin Sun 孙伊晨 (@justinsuntron) February 20, 2023

According to Sun, Huobi global will launch a new exchange in Hong Kong dubbed “Huobi Hong Kong”. The exchange will also focus on providing educational services to institutional investors and high net worth individuals in Hong Kong.

“It positions the exchange as a reliable and secure platform for large investors in Asia looking to enter the crypto market,” Sun said.

Earlier this month, Sun signaled plans to move to Hong Kong to “be closer to the action and take advantage of opportunities in the Asian market.”

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