HK to be cryptocurrency testing field
▶ Part of move to develop innovative fintech
The Hong Kong Securities and Futures Commission (SFC) launched a position paper on virtual currency exchange platform regulation on Wednesday, a move meaning that a legitimate virtual property trading exchange is a step closer in the special administrative region, which will help the financial hub consolidate its position, industry insiders said.
Some of them noted that the move reflects a shift in the philosophy of Chinese regulators facing competition from Libra.
According to the paper on the SFC’s official website, qualified virtual asset platform operators that comply with other licensing requirements could be granted a license to conduct virtual asset transactions by the SFC.
The SFC also released a warning on the same day, noting that virtual asset futures asset exchanges would be banned.
“Now, Beijing aims to build Hong Kong into the largest testing ground for a cryptocurrency exchange and Shenzhen into a pilot one for a central bank-backed digital currency. If China’s digital currency is launched, then it could be listed in Hong Kong exchanges that target global market,” an industry insider close to the matter, who spoke on condition of anonymity, told the Global Times.
He noted that in such a way, the digital currency/electronic payment system of the People’s Bank of China (PBC), the central bank, could gain a wider user base to compete head-tohead with Libra, which is being developed by US technology company Facebook.
Authorities in the Chinese mainland imposed a ban on initial coin offerings and cryptocurrency trading exchanges in September 2017, due to concerns over financial risk. Following the decision, most cryptocurrency exchanges founded in the mainland moved to overseas locations.
Shentu Qingchun, CEO of Shenzhen-based blockchain company BankLedger, said that policymakers may have realized that such a sweeping measure is not conducive to the Chinese fintech industry’s development and are taking steps to minimize the negative impact.
“Hong Kong may just be the first example to allow the setting up of virtual property trading exchanges. Shenzhen and South China’s Hainan Province may be the next to start legitimate virtual currency trading,” Shentu told the Global Times.
Apart from the potential move of legalizing virtual property trading, financial authorities from the mainland have also been strengthening cooperation with Hong Kong in various sectors recently, moves that experts said could help the financial hub consolidate its position amid months of riots in the city. On Wednesday, Hong Kong also forged cooperation with the PBC to promote the application of blockchain technology in its finance sector, the Hong Kong Monetary Authority (HKMA) announced.
On its website, the HKMA said that a memorandum of understanding was signed between the subsidiaries of Hong Kong Interbank Clearing and the Institute of Digital Currency of the PBC to conduct a proof-of-concept trial.