Hong Kong Following UK
Hong Kong is eager to foster advancements in the world of cryptocurrencies. Recently, it proposed a regulatory “sandbox” that will offer space for innovation without the burden of regulatory actions. Cryptocurrency is already doing well in Hong Kong. One of the major trading platforms in the crypto space, Bitfinex, shifted its banking account to Hong Kong’s Bank of Communications last month. The Securities and Futures Commission chief of Hong Kong, Ashley Alder introduced the plan last week. The move is similar to one by the financial regulator of UK in its two-year 2016 program. UK’s FCA regulator even stated that the process helped the country establish its dominance as a global fintech hub.
The UK’s Financial Conduct Authority stated that its sandbox provides an ability to test services and products in a controlled ecosystem. Other purposes include providing a reduced time-to-market, financial access, and supporting the identification of appropriate consumer protection safeguards. With the launch of the regulatory sandbox, Hong Kong is shifting its standing. In February, the regulator warned that it will shutter any virtual currency exchanges operating without a license or violating local securities laws.
Will Hong Kong take inspiration from UK?
UK’s FCA succeeded in establishing a robust fintech industry in the country with its sandbox. In March this year, the Director of Strategy and Competition, Christopher Woolard, stated that the agency provided services to around 500 firms. Out of these, it worked closely with 70 firms through the sandbox.
The new solution for cryptocurrency regulations is a mechanism intended to develop regulation while preserving a rapid pace of innovation. At present, SFC governs the crypto assets by classifying them as futures or securities. By being a part of the new regulatory sandbox, the cryptocurrency exchanges are agreeing to the supervision by the SFC. They are also following compliance efforts. The situation is in the best interest of the exchanges, investors and consumers.
Alder stated, “The measures announced today allow us to regulate the management or distribution of virtual asset funds in one way or another so that investors’ interests would be protected either at the fund management level, at the distribution level, or both.” He further added that similar to outages, market abuse, and manipulation is very common including frauds and scandals. The regulatory approach will most certainly contribute to the elimination of such issues.