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Hong Kong diverges from China, revealing it will legalize retail crypto investing

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(Kitco News) - Hong Kong is looking to set itself apart from China and reestablish its standing as a global cryptocurrency hub based on several legal initiatives recently launched that pertain to the crypto industry. 

The government of the special administrative region of China is considering the introduction of a bill that will regulate crypto with a different approach than that of the mainland, according to Elizabeth Wong, head of the fintech unit at the Securities and Futures Commission (SFC). The comments from Wong were first reported by the South China Morning Post on Oct. 17.

During a panel discussion held by InvestHK on Monday, Wong noted that while the “one country, two systems” principle “forms the basic foundation to Hong Kong’s financial markets,” the fact that the city has been able to introduce its own cryptocurrency regulation bill “shows just how separate Hong Kong is from the mainland.” 

The SFC is now considering allowing retail investors to “directly invest into virtual assets,” Wong added. 

This would signal a notable shift from the agency’s stance in recent years, which limited crypto trading on centralized exchanges to individuals with a portfolio of at least HK$8 million (US$1 million).

Wong pointed to improvements in compliance and four years of experience regulating the crypto industry as reasons for the move, adding that the SFC thinks “this may be actually a good time to really think carefully about whether we will continue with this professional investor-only requirement.”

The comments align with recent attempts by the government of Hong Kong to entice fintech companies to return to the city following their departure amid China’s crackdown on all things crypto. 

This shift in enforcement is meant to demonstrate its “vision of developing Hong Kong into an international virtual assets center,” according to the organizers of Hong Kong Fintech Week, which will take place from Oct. 31 to Nov. 4. 

According to an official statement from Christopher Hui, the Secretary for Financial Services and the Treasury for Hong Kong, a new policy statement on cryptocurrencies will be unveiled during Fintech Week that will make the city’s stance on virtual assets “clear to global markets.”

Wong highlighted that the SFC has been working over the past year to help relax the requirements for retail investor participation, including the January introduction of a policy that allowed service providers to sell virtual asset-related derivative products to retail investors. The agency has also been reviewing whether to allow retail investors to invest in crypto-related exchange-traded funds, the head of the fintech unit noted.

Macau looks to apply traditional currency regulations to digital currencies

The city will also introduce a mandatory licensing requirement for all cryptocurrency trading platforms in the near future, which will be enacted into law through an amendment to the city’s anti-money-laundering ordinance. 

These revelations out of Hong Kong follow the launch of a $3.8 billion fund designed to attract foreign businesses back to the city after a period of “chaos” marked by strict COVID lockdowns and political upheavals led to the mass exodus of talent. 

Hong Kong's new leader John Lee announced the new fund along with multiple other political and national security measures during his maiden annual policy address on Oct. 19. 

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