Hong Kong Adopts Web3 Regulation After FTX Collapse
Julia Leung Fung-yee, the CEO of the Hong Kong Securities and Futures Commission (SFC), spoke about Hong Kong’s adoption of Web3 regulation in the wake of the crypto exchange FTX’s collapse in November, emphasizing that crypto trading is a significant component of the virtual asset environment.
During a recent address, Leung reportedly stated that the new licensing arrangement for virtual asset providers will guarantee investors are safeguarded while recognizing the dangers that monetary institutions confront. In the top official’s opinion, the only way to accept advancement and reinforce market trust after the FTX bankruptcy was to incorporate virtual asset providers into the regulatory framework.
In December, roughly a month after the FTX collapse had occurred, Hong Kong’s legislative council amended legislation that regulates traditional financial institutions to also include virtual asset service providers, taking advantage of the situation to reduce the regulatory risks associated with centralized exchanges.
The Hong Kong government is putting pressure on major banking institutions to accept crypto customers.
Hong Kong Introduces Licensing System and AML Regulations for Crypto Exchanges
The introduction of new regulations has brought stringent Anti-Money Laundering (AML) regulations and investor protection laws for virtual exchanges wanting to establish a presence in Hong Kong. Additionally, a new licensing system has been implemented which allows retail investors to participate in trading of virtual assets. Until recently, only professional investors and traders with a bankable asset of at least $1 million were allowed to engage in digital asset trading.
Leung argued that the cryptocurrency licensing system in Hong Kong is a reflection of China’s “one country, two systems” policy. Despite the fact that cryptocurrencies have been prohibited in Mainland China since 2021, Hong Kong has opted to create a hospitable atmosphere for crypto companies.
In the last year, more than 150 Web3 companies have set up in Hong Kong’s Cyberport, a digital center established by the government to encourage innovation. This influx of businesses was spurred by the government’s investment of 50 million yuan ($7 million) to accelerate the progress of Web3.
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