Hong Kong has thrown down the gauntlet in its race with regional rival Singapore to be a digital asset hub, with the city state introducing a proposal to allow retail access to cryptocurrency.
According to a consultation paper published by the Hong Kong Securities and Futures Commission (SFC) on Monday, retail investors will be able to access the two largest crypto tokens - Bitcoin and Ethereum. However, retail customers are required to pass a knowledge assessment or else only be offered access after training is provided. The SFC also requires all digital asset trading platforms operating in Hong Kong or actively marketing to Hong Kong-based investors to obtain a license from the SFC.
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The plan, which will be put forward for a period of six weeks to receive feedback from "interested parties", also stipulates that only of 2% of customer funds can be kept in "hot wallets".
The latest developments come after the SFC announced last month that only assets with "deep liquidity" will be made available to retail investors.
“Some virtual assets platforms have over 2,000 products, but we do not plan to allow retail investors to trade in all of them. We will set the criteria that would allow retail investors to [only] trade in major virtual assets," said Julia Leung, the newly appointed CEO of the Securities and Futures Commission (SFC).
Pushing towards hub status
Despite its strong stance against retail participation in the space, Singapore was generally viewed as more progressive to its Northern Asian rival when it comes to the digital assets sector.
However, it seems like HK is now on the front foot, with regulators laying out clear plans for the development of its digital assets space both for institutions and retail customers, while maintaining its strong stance on investor protection.
"This is part of Hong Kong regulators’ great efforts to issue clear and coordinated guidance on how centralised virtual asset trading platforms should operate," said Patricia Ho, deputy general counsel at OKX.
Highlighting the "recent turmoil and the collapse of some leading crypto trading platforms around the world", Leung said that investor protection and regulation remains a priority.
“As has been our philosophy since 2018, our proposed requirements for virtual asset trading platforms include robust measures to protect investors, following the ‘same business, same risks, same rules’ principle," Leung said in the consultation paper.
Hong Kong's recent regulatory developments have been seen by the industry as a welcoming hand, with both institutional and retail-facing crypto companies eager to set up shop in the city state.
Last week, DBS, the largest bank in Southeast Asia, announced that it is seeking the license that would permit it to offer crypto trading to Hong Kong customers.
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Meanwhile, Tron founder and Huobi advisor Justin Sun has said that Huobi Global is applying for a crypto trading license in Hong Kong.
According to Sun, Huobi global will be launching a new exchange in Hong Kong dubbed as "Huobi Hong Kong". The exchange will also focus on providing traing services institutional investors and high net worth individuals in Hong Kong.
"It positions the exchange as a trusted and secure platform for larger investors in Asia who are looking to enter the crypto market," Sun said.
Earlier this month, Sun signalled his intent to move to Hong Kong to "be closer to the action and take advantage of the opportunities in Asia market".