Global Digital Finance, a crypto exchange group, has warned Hong Kong against the proposed law banning retail traders from conducting crypto activities. This will increase the adoption of unregulated platforms by crypto retailers.
Global Digital Finance against Hong Kong Crypto regulation
Hong Kong cryptocurrency industry participants have worked hard to defy upcoming laws that will restrict legal cryptocurrency transactions to professional investors, keeping 93% of the local population out.
In a comment published in the South China Morning Post on February 15, industry association Global Digital Finance Corporation warned that the proposed law could encourage retailers to adopt unregulated platforms. Global Digital Finance represents cryptocurrency exchanges like BitMEX, Huobi, Coinbase, and OKCoin and has been at the forefront of the industry’s efforts to counter impending legislation.
Hong Kong New Law Controversial
To strengthen anti-money laundering and terrorist financing measures, the Hong Kong Ministry of Financial Services and Finance first published the proposal in November 2020. This move is in line with efforts to align national regulations with the Financial Action Task Force (FATF).
However, the agency’s proposal exceeded the FATF framework’s requirements and instead echoed mainland China’s tough stance on cryptocurrency transactions. Malcolm Wright, chair of the Global Digital Finance Advisory Committee, noted that FATF members Singapore, UK, and the US continue to allow retailers to participate in the cryptocurrency market.
In January the government negotiated with the public and industry groups. With the consultation period coming to an end, the proposal is expected to be presented as draft law and submitted to the Hong Kong Legislative Council in the second half of this year. A recent poll by CitiBank found that the South China Morning Post estimated the ban would affect 93% of the domestic population. The survey found that approximately 7% (504,000 people) have sufficient wealth to meet the person’s professional investment threshold.
A representative from the Hong Kong Bitcoin Association recently pointed out that “restricting individual retailers’ access to Bitcoin will outweigh the government’s goal of promoting innovation and achieving financial inclusion.” The proposed restrictions can also be extended to Bitcoin ATMs or ATMs, which will also be significant, expanding the scope of the existing corporate crypto licensing rules in Hong Kong.