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Hong Kong's Cryptocurrency Regulation Puts Tension To Crypto Investors

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Avatar for Jane
Written by   594
1 week ago

October 16, 2020

Different parts of the world adopted cryptocurrency after it has been introduced to the market last 2009 and has been chased by many investors worldwide. In a short period, it created a new economy that offered new opportunities to the market. Hong Kong, on the other hand, takes advantage of this technology and adopted Bitcoin as its first digital currency. Hong Kong is a non-interventionist government and so the administration didn’t pay much attention to Bitcoin for many years. Many investors started to invest in the expectation that virtual assets could soon be used in payments, while retail investors engaged for short term gains.

However, in 2014, John Tsang, Hong Kong’s Finance Secretary described Bitcoin as “a commodity generated in the cyber world,” and explained that it shouldn’t be allowed to be electronic money or a store of value for making payments.

Bitcoin Volatility from data.bitcoinity.org

The government also warned the crypto users about the volatility of Bitcoin and described it is as a highly theoretically product. In 2017, China imposed a complete ban on cryptocurrency exchanges and coin offerings due to numbers of fraud cases and market manipulation.

Take MyCoin Hong Kong Bitcoin Exchange.

Photo credit: coindesk.com

In 2015, it suddenly disappeared with the $387 million funds from different customer's deposits. MyCoin did not operate legally in Hong Kong and has believed that it never actually facilitated any virtual trading, but was running a Ponzi scheme instead. As of now, 5 scammers have been arrested, but others may still be on the run and developing similar scams.

Due to these matters, the HKSAR has formalized regulations protecting investor's interest in Bitcoin volatility and potential scams or frauds and that the government believed it could help make the city a major cryptocurrency hub in the future. In November 2018, Hong Kong's Securities and Futures Commission (SFC) established a ‘new regulatory framework’ for cryptocurrency assets portfolio managers. The SFC issued two circulars: one for the funds on investing in digital currencies and the other on trading platforms, which takes effect immediately. All transactions regarding cryptocurrency are now under the regulatory purview of the Hong Kong Monetary Authority or the SFC.

According to Gary Cheung, chairman of the Hong Kong Securities Association, "It will boost investor protection and hence attract more mainlanders to trade cryptocurrency assets in Hong Kong.” He also said that "This will help Hong Kong to be among the top cryptocurrency trading centers worldwide because proper regulation is very important for attracting big players.” And SFC chief executive, Ashley Alder said in his speech at the 2018 Hong Kong FinTech Week, "To afford better protection, only professional investors should be allowed to participate for the time being.

The cryptocurrency regulation made some changes affecting the cryptocurrency space as a whole especially the small crypto investors. Professional investors under Hong Kong law pertains to those with at least HK$8 million (US$1.02 million) in investment assets and two years of experience. The fund manager brokers and platform operators will be accountable to make sure that only professional investors are eligible in trading.

The new law states that:

  • All funds that invest more than 10% of their assets in digital currencies will need to apply for SFC license. This applies to all cryptocurrency-related investments, regardless if they are securities or not.

  • Cryptocurrency trading platforms will need to voluntarily join the so-called “regulatory sandbox.” While negotiating with the SFC on their licensing requirements, the investors can continue to trade. The SFC will then decide on how to best license and regulate the sector.

The SFC chief executive said that a sandbox is important for cryptocurrency platforms in matching the new requirements for currency exchange. Alder also says that the SFC will obtain high criteria for these cryptocurrency platforms, fitting to those for other computerized trading platforms like dark pools.

Last October 24, 2019, President Xi of China has given a comment emphasizing the importance of blockchain, bringing out the need to expedite the improvement of technology in China. And according to a report by the South China Morning Post, October 24 has been proposed by the Communications Industry Association, an affiliate of the Chinese Ministry of Industry and Information Technology to become the designated day to celebrate blockchain. Based on Coindesk report, days after the comments were made public, the Standing Committee of the 13th National People’s Congress in China enacted a new law intended for “facilitating the development of the cryptography business and ensuring the security of cyberspace and information.” The law, which took effect last January 1, 2020 tackles about ensuing regulatory and legal challenges in commercial cryptography use-cases.

Some acclaimed the move by the SCF, however for many, this became a burden to them. The president of the Bitcoin Association of Hong Kong, Leo Weese, has called the regulatory sandbox “a cage, that places unreasonable burdens on exchanges.” He is afraid that it may steer blockchain-related investment out of China. He also wrote online, “While Hong Kong was a better place when it did not bother such platforms, was inevitable this day would come. Exchanges will likely maintain parts of their teams in Hong Kong, but work harder to convince the public of a new narrative that places them outside SAR."

Despite the new law, so far, there are no plans for crypto exchanges to leave Hong Kong. To date, Hong Kong’s Securities and Futures Commission (SFC) granted OSL an “approval-in-principle” for its application to operate a virtual asset trading platform Type 1 (dealing in securities) and Type 7 (automated trading service or ATS). OSL is the first crypto company approved by the SFC, it has obtained insurance cover for both hot (online) and cold (offline) storage of virtual assets. It is also Asia’s leading digital asset platform and member of BC Technology Group.

As of September 2020, buying Bitcoin futures contracts has no legal way in Hong Kong. Hong Kong's Securities and Futures Commission (SFC) has released guidance on futures contracts about Bitcoin and followed the guidance up with a warning:


Here are the lists of Popular Exchanges to Buy Bitcoin & Crypto in Hong Kong:

  • Coinmama allows customers in almost every country to buy bitcoin. They charge a 4.9%-5.9% (depends on volume) fee on each purchase.

  • CEX.io lets you buy bitcoin with a credit card, ACH bank transfer, SEPA transfer, cash, or AstroPay. Purchases made with a credit card give you access to your bitcoin immediately. 

  • Kraken is one of the world's largest cryptocurrency exchanges and the largest in Europe based on daily average trading volume.

  • Gemini is a New York-based Bitcoin exchange, open to residents of the United States, UK, Canada, Hong Kong, Japan, Singapore and South Korea. Deposits can be made via wire transfer, SEPA or ACH transfer.

  • LocalBitcoins is an escrow service which also helps to match bitcoin buyers and sellers. Users may advertise trades for whichever payment method they prefer.

  • BTCC is China's second-largest Bitcoin exchange and the longest-running Bitcoin exchange in the world. You can fund your exchange account online via bank transfer.

  • OKCoin is the largest Bitcoin exchange in China. Customers can make deposits to their exchange accounts via bank transfer.

  • Huobi is the third-largest Bitcoin exchange in China. You can fund your exchange account online via CNY bank transfer or with USD via OKPay (1.5% fee) or international wire transfer (1% fee).

  • Mycelium Local Trader helps you find local Bitcoin sellers. Once you locate a seller, you meet up in-person and conduct the trade. Mycelium charges no fees. While Mycelium Local Trader works great in highly-populated areas, users in low population

Source:https://www.buybitcoinworldwide.com/hong-kong/

Here is a map of Bitcoin ATM where you can buy bitcoins with cash. However, most ATMs have fees of 5-10%.

Photo credit: buybitcoinworldwide.com

Written by: @Jane

If you want to know more about Hong Kong Cryptocurrency Regulations, you can visit this link:

https://www.charltonslaw.com/sfc-issues-regulations-for-licensed-crypto-exchanges/

Sources:

https://amp.scmp.com/business/banking-finance/article/2171157/cryptocurrency-rules-be-unveiled-sfc-hong-kong-aims-become

https://www.buybitcoinworldwide.com/hong-kong/

https://www.google.com/amp/s/tokenist.com/hong-kong-set-to-shake-up-cryptocurrency-exchange-licensing-process/amp/

https://fintechnews.hk/10331/fintechchina/china-blockchain-xi-jinping/

https://www.google.com/amp/s/www.coindesk.com/osl-crypto-exchange-hong-kong-regulation%3famp=1

Lead image from cfo.com

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Comments

Nice article. Thanks

$ 0.00
1 week ago

I wonder why crypto is not that popular in our country though. I've only seen news about crypto on internet blogs and vlogs but not on tv and newspapers.

$ 0.00
1 week ago

Because our President doesn't want to adopt it yet..there are many frauds on crypto in Ph before.. I think that's the reason why our pres. doesn't like crypto

$ 0.00
1 week ago

Yes, I've heard a lot of stories from people who we're scammed with regards to crypto.

$ 0.00
1 week ago

Yung forsage na sinalihan ko..naging scam na..pro International nmn yan.. Buti nabawi ko investment ko bago maging scam

$ 0.00
1 week ago

Oh? Marami din nag offer ng forsage sa akin dati. Buti na lang pala at di ako sumali. Good for you at nabawi mo yung investment.

$ 0.00
1 week ago

Oo nga eh.. Triple pa..haha.. Lucky lng cguro ako magaling yungnag invite sakn.. At least nabawi

$ 0.00
1 week ago

Sana all di unpublished nang robot pag crypto topic 😆 Sakin na unpublish kaloka, yung latest ko. need ko pa e edit ulit..

$ 0.00
1 week ago

Modify lng 🤣 at kita mo yang grey highlighted? Yan ginagawa ko kpg galing sa real statement yung words.... At i guess hndi madedetect ng bot yun.. Yung hndi ko mamodify, hinahighlight ko..at my sources nman jan. Hehe

Depende rn kc kung ano topic mo at sa sources dn ata.. Db yung iba my copyright tlga.. Gaya dun sa nabasa ko bout jan na topic, nung magcocopy sana ako, sabi my copyight dw yung article kya ayun hndi ako nagcopy.. Yang charlson law site na nilagay ko sa baba.. Pro hndi ako kumuha ng details jn.. Mahirap na.. Sa iba ako kimuha.. Nilagay ko lng kc anjan complete info bout sa regulations

$ 0.00
1 week ago

Ahh okay, ma try nga haha. Thanks for the info edit ko na lang yung sakin. Sayang din effort ko pag gawa doun 😆😂

$ 0.00
1 week ago

My ginawa alo dati yung about sa father of crypto, hndi tinanggap..haha.. Pro andto padin d ko pa dinelete.. Twice ko inedit hndi tinanggap.. Cguro kc madami na articles about that from famous bloggers

$ 0.00
1 week ago

Kaya nga siguro kaya ayaw tanggapin nung akin kainis haha about staking yun eh.

$ 0.00
1 week ago

Ayun.. Haha.. Btw do you havr acct on publishox? My writing contest dun about dex token.. Wala ako alam kya hirap sumali haha

$ 0.00
1 week ago

oo meron kaso tamad ako mag open don 😆 di rin ako familiar sa dex token tsaka daming established writer na doon, hirap makipag compete don 😆

$ 0.00
1 week ago

Kikita ka doble kung article mo dto ipost dn dun. Yun ginagawa ko.. Pro mas malaki kita ko dto haha.. D ko magets yan dex token nagbasa na ko articles bout jan..haha.

$ 0.00
1 week ago

Gumawa din ako ng account dun kaso parang ang hirap dun eh. Hi di ba dun mahigpit tulad dito na dapat exc yung article?

$ 0.00
1 week ago

So far wala pa ko problema dun..haha .. at my natatanggao akong tips sa mga article ko.. Pwd nmn yun post dto post din dun..total tyo nmn gumawa

$ 0.00
1 week ago

Kaya nga open ko nga ulit yun hahaha tinatamad kase ako mag open don. Wla pa ako payout don kaya ganon hahaha

$ 0.00
1 week ago

Naku check mo ulit.. Hndi kna makakagpost kpgmatagal hndi active.. Yn nangyari sa isa kong acct kya gumawa ako new.. Makakaearn kn mn kung everyday k magbigau tips..

$ 0.00
1 week ago

Government doesn't want everyone to know about crypto. I've seen a news that 2 famous personality talked about it in an interview they refused to air it on the television. Though I'm not sure if it's true.haha

$ 0.00
1 week ago

Only in Ph..haha.. China and HK are already adopting it its a big help to the economy actually

$ 0.00
1 week ago

haha. true. The latest news I saw was Angel's interview. I think she mentioned about investing to crypto pero sabi sa news na nabasa ko pinatanggal daw yung video or interview na un sa kanya

$ 0.00
1 week ago

I think kase di pa kase yung government natin mismo nag organize nang adoption but I read some news that our country is starting to invest in cryptocurrency but it will take time pa, kaya di pa na air yung interview ni Angel about don..

$ 0.00
1 week ago

I see. Nakakatuwa naman at ng invest na sila sa crypto though yes need more time pa

$ 0.00
1 week ago

Oo wait hanapin ko link nung sumulat non hehe. Dadating din tayo dyan pero mabagal nga lang hahaha.

$ 0.00
1 week ago

Of course, Angel loses so much money from ABS CBN, she's one of the stockholders there... But after the shutdown, for sure she looks for another resort 😅 and maybe that's crypto...

$ 0.00
1 week ago

yeah,maybe.hehe. It's a blessing in disguise kung ganun kasi mas maganda kitaaan sa crypto ne.

$ 0.00
1 week ago

At walang tax lol

$ 0.00
1 week ago

Interesting article

$ 0.00
1 week ago

Hmm.. so putting a regulation on crypto isn't that feasible either but the bitcoin atm look so attractive. Would be great if crypto was openly taught to the public tho

$ 0.00
1 week ago

Yes and there are some stores here already accepting byc,bch,ltc and eth.. Ill tackle about it in my next article.. Now that iknkw the locations of bch vending machine, ill visit it tomorrow

$ 0.00
1 week ago

Ohh have fun doing that! I'm waiting for the day that happens here ;;-;; just trading crypto wouldn't be fun. Would be nice if i could actually pay with that without actually waiting for a good time to convert it

$ 0.00
1 week ago