Hong Kong to allow retail investors to trade crypto amid Asia’s regulatory clampdown

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23rd May 2023 – (Hong Kong) Hong Kong is poised to announce that retail investors can trade cryptocurrencies under its new rulebook for the sector, as the city seeks to establish itself as a leading global financial centre. The Securities and Futures Commission is expected to detail the conclusions of its consultation on retail participation at a briefing on Tuesday. The agency is predicted to proceed with plans to allow individual investors to trade larger tokens such as Bitcoin and Ether, with appropriate safeguards, starting next month. Hong Kong‘s new licensing regime for virtual-asset platforms will also be rolled out on 1st June.

However, some are questioning whether the move is premature given the crypto industry’s recent troubles. In 2022, the market experienced a significant downturn, resulting in bankruptcies such as the collapse of the FTX exchange. Nonetheless, Lennix Lai, the chief commercial officer at crypto exchange OKX, believes that safe, secure, and compliant retail trading is a crucial aspect of a robust virtual asset ecosystem.

In February, Hong Kong outlined its plan for letting individual investors trade larger coins on exchanges licensed by the SFC. The regulator intends to ensure that appropriate safeguards are in place, such as knowledge testsrisk profiles, and reasonable limits on exposure. The coins should also be included in at least two acceptable, investible indexes from independent providers, one of which should have experience in the traditional financial sector.

The move by Hong Kong comes as regulators worldwide grapple with how to handle the crypto industry. While some jurisdictions, like Hong Kong and Dubai, are trying to attract crypto-related investment, others, like Singapore, plan to curb retail-investor participation. South Korea is also set to pass its first standalone crypto legislation this week following a series of scandals, while the US has taken a tough stance on the sector.

However, recent tensions between regulators and the industry in Malaysia and the Philippines have highlighted the challenges of regulating the crypto industry. Malaysia reprimanded the Huobi Global platform for operating “illegally” and ordered it to stop activities there, even though the exchange hasn’t operated in the country since 2022, according to a spokesperson. Meanwhile, the Philippines alleged that a non-US derivatives trading venue recently launched by Gemini Trust Co. lacks the necessary permits for the nation.

Hong Kong’s move to embrace crypto has also raised questions about the industry’s ability to recover fully from last year’s crash. Nevertheless, firms such as Huobi Global, OKX, and Amber Group have said they plan to apply for licenses under the new regime. Hong Kong Monetary Authority Chief Executive Eddie Yue has indicated that companies should expect strict regulation.