High-rise buildings are seen near Victoria Harbor in Hong Kong, China, July 24, 2023. (Photo by Costfoto/NurPhoto via Getty Images)
Costfoto | Nurfoto | Getty Images
Asia is promoting cryptocurrency clarity amid regulatory uncertainty in the US, which could make the region more attractive to investors, according to industry observers.
“Cryptocurrency regulation in Asia has moved faster and more clearly — green light or red light — than in the U.S.,” said Ben Charoenwong, a finance professor at the National University of Singapore’s Business School.
“This has made Asia the premiere location for much of the fintech innovation,” Charoenwong said.
Earlier this month, Hong Kong officially opened cryptocurrency trading to retail investors and upgraded the licenses of two exchanges. HashKey and OSL can now expand their business beyond professional investors to include retail investors.
“This shows that virtual assets are becoming a recognized asset class with similar regulatory status to traditional asset classes,” said Lennix Lai, global chief commercial officer at OKX cryptocurrency exchange.
“This will further boost investor confidence, making Hong Kong more attractive as a potential global virtual asset hub,” Lai said. OKX is applying for a license to trade virtual assets in Hong Kong.
Hong Kong and Singapore are similar in their approach to maintaining very high regulatory standards.
Ong Chengyi
Head of APAC policy, Chainalysis
Last year, Hong Kong said it recognized “the potential of distributed ledger technologies and Web 3.0 to be the future of finance and commerce” and expected to improve efficiency and transparency with proper regulation.
Rival regional financial hub Singapore has also been a pioneer in cryptocurrency regulation. The Monetary Authority of Singapore granted Blockchain.com a license in August, upgrading the in-principle approval it received in October. Another player, Ripple, received in-principle approval in June. This means that Blockchain.com and Ripple can provide regulated cryptocurrency services in Singapore.
Meanwhile, Thailand and Indonesia have banned the use of cryptocurrency for payments but allow it to be sold as a commodity.
Hong Kong had the opportunity and background to go through the cryptocurrency winter and see what other regulators are doing to strengthen and spread their regime.
Janice Goh
Partner at Cavenagh Law
On the contrary, Coinbase and Ripple are in litigation with the US Securities and Exchange Commission, which accuses them of violating securities laws. Both Coinbase and Ripple, as well as other crypto companies, have threatened to leave the US in response to the SEC crackdown.
Confusion in the US
Certainly, the sector has been mired in scandal and high drama over the past year. FTX filed for bankruptcy in November, and Terraform and its CEO, Do Kwon, were charged with defrauding investors in February.
Bitcoin is trading near $28,373, an all-time high of more than $65,000 in 2021.
Cryptocurrency leaders have criticized the US and its regulatory approach, particularly for a lack of clarity.
In 2020, the SEC accused Ripple and its co-founders of violating securities laws by selling their native cryptocurrency XRP without registering with the SEC. But a landmark ruling in July determined that the token itself is not necessarily a security.
Meanwhile, the SEC sued Coinbase in June, alleging that it operated an unregistered exchange and brokerage. In the same month, Binance was accused of several securities violations.
“I think it’s fair to say that the US has made it as confusing as possible what the rules of the road are for the crypto industry. The SEC has really been at the forefront of this confusion,” said Ripple CEO Brad Garlinghouse. Interview with CNBC in May. He eventually concluded that some crypto firms may leave the US for more progressive jurisdictions.
Asia’s regulatory clarity
In the Pacific, Singapore and Hong Kong offer greater operational clarity for many industry players.
“Singapore has a first-mover advantage in the Asia Pacific region, including being ahead of Hong Kong. No other country has been this far ahead in having a sufficiently developed licensing regime,” Janice Goh, partner at Cavenagh Law told CNBC told to
In November, MAS managing director Ravi Menon made it clear that Singapore wants to be a hub for digital assets, but not for cryptocurrency speculation.
“Hong Kong and Singapore are similar in terms of both maintaining very high regulatory standards and being very proactive in creating an enabling environment for digital asset businesses,” said Ong Chengyi, head of APAC policy at blockchain analytics firm Chainalysis.
Ong expects Hong Kong to issue more licenses and more crypto firms to flock to Asia.
In June, Gemini said it would increase its headcount in Singapore and act as its regional hub, joining Coinbase and Ripple in expanding the city-state’s operations in Asia.