Hong Kong Securities and Futures Commission (SFC) chief executive Julia Leung Fung-yee, managed Hong Kong's adoption of Web3 regulation following the collapse of cryptocurrency exchange FTX last November, signaling that cryptocurrency trading is an important part of the virtual asset ecosystem.
During a recent speech, Leung reportedly explained that the new licensing system for virtual asset providers will ensure that investors are protected taking into account the risks financial institutions face. In the boss's view, bringing virtual asset providers into the regulatory system was the only way to embrace innovation and strengthen market confidence after FTX bankruptcy.
Hong Kong used the FTX crash to reduce regulatory risks associated with centralized exchanges. In December, almost 30 days after the currency crisis broke out, its legislative council including virtual asset service providers in the same legislation governing traditional financial institutions.
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The new rules bring strict AML guidelines and investor protection laws to virtual exchanges looking to open a business in Hong Kong. It also introduces a new licensing scheme that allows retail investors the ability to trade in virtual assets. Until recently, digital asset trading was restricted to professional investors and traders with at least $1 million in fundable assets.
According to Leung, Hong Kong's cryptocurrency licensing system is a good example of China's "one country, two systems" policy. Cryptocurrency has been banned in mainland China since 2021, while Hong Kong took a different approach by promoting a welcoming environment for cryptocurrency business.
In the last 12 months, more than 150 Web3 companies have established operations at the Hong Kong Cyberport โ a digital hub created by the local government to promote innovation. The influx came after the government allocated 50 million yuan ($7 million) to speed up Web3 development.
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