Christopher Hui, the Secretary for Financial Services and the Treasury of Hong Kong stated on July 3 that Hong Kong regulators would closely monitor market developments following several global crypto exchanges’ withdrawal of license applications.
License Withdrawals Drives Policy Review by Hong Kong Regulators
Hui provided insights into the regulatory stance on cryptocurrencies amid recent developments by disclosing that Hong Kong’s regulatory bodies, including the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC), would closely monitor market trends regarding virtual assets (VAs).
HONG KONG TO REVIEW CRYPTO REGULATIONS
In response to a lawmaker's question, Christopher Hui, Secretary for Financial Services and the Treasury, said the Hong Kong Monetary Authority and the Securities and Futures Commission will monitor market developments and adjust… pic.twitter.com/j9jF55Y9lY
— Crypto Town Hall (@Crypto_TownHall) July 3, 2024
The statement was made in response to lawmakers’ inquiries about potential revisions to crypto licensing requirements following the withdrawal of license applications by major global exchanges.
Hui said that licensed corporations and registered institutions can distribute crypto-related products without modifying their licensing conditions as long as they inform Hong Kong regulators.
The context of Hui’s comments lies in implementing the New Capital Investment Entrant Scheme (New CIES), which was introduced on March 1 to attract foreign investments and talent to Hong Kong.
Since its inception, the New CIES has received over 300 applications, with approvals granted for net asset assessments and investment requirements.
To qualify for the New CIES, applicants must have had at least HK$30 million in net assets or equity for the two years before applying.
The requirement may have contributed to several global exchanges withdrawing their applications in recent months.
For instance, HTX withdrew its Hong Kong crypto trading license application for the second time. Also, on May 23, Gate.io abandoned its trading license application, with plans to delist tokens by August 28. While the exact reasons for these actions are unclear, this requirement might have been a contributory factor.
In the same vein, OKX withdrew its Virtual Asset Service Provider (VASP) license application on May 31 and ceased trading services for local residents.
These withdrawals sparked criticisms and scrutiny from Hong Kong’s Legislative Council members, including Wu Shuo, who expressed concerns about the crypto licensing system while stating its impact on market confidence and the direction of Hong Kong’s virtual asset market development.
Regulators Concerned About Spate of Crypto Scams
One of the goals of the NEW CIES crypto regulation is to protect local investors from bad actors. The regulation requires companies to conduct crypto knowledge tests for customers and inform them about the risks involved in trading crypto assets to achieve this goal. This is important as the spate of crypto scams continues to rise in Hong Kong.
In March, a 46-year-old housewife in Hong Kong reported losing 7.1 million Hong Kong dollars ($908,000) after investing in a fraudulent crypto platform.
The fraud began in July 2022 when one of the scammers contacted her through Instagram, urging her to invest in cryptocurrencies via a fraudulent trading platform. Another cyber criminal, posing as a customer service representative, tricked her into transferring over $900,000 into 15 bank accounts from August 19, 2022, to March 4, 2023.
Hong Kong police also noted a surge in crypto investment scams as digital assets continue to gain popularity in the region. Financial losses from these frauds jumped 42.6% to HK$3.26 billion last year, up from HK$926 million in 2022. The number of reported cases also rose greatly, from 1,884 in 2022 to 5,105 in 2023.
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