Business executives from mainland China are keeping tabs on Hong Kong crypto regulations as it pushes to become a regional crypto hub.
According to the report, the chance that retail trading will be permitted on the city’s two licensed exchanges, HashKey and OSL, has drawn Chinese companies and banks.
Hong Kong Sees Influx of Chinese Business
It is reported that business owners in mainland China attended five days of talks. It included discussions with venture capitalists, incubator program directors, and representatives from the government’s foreign investment agency.
Hong Kong currently only permits professionals to transact in cryptocurrency. But proposed crypto regulations would enable citywide retail trading of digital assets. This anticipation has driven a sudden rise in inquiries from Chinese business owners.
Since the domestic securities regulator decided to loosen rules in October, there has been a favorable reaction. Industry sources informed the publication that they plan to expand their businesses and file for licenses in Hong Kong.
Joshua Chu, a crypto lawyer in Hong Kong, told Nikkei Asia that he thought Beijing was considering Hong Kong as a web3 test market. He said, “Hong Kong is likely to take the lead and be a test bed.”
“China will likely build on the Hong Kong experience and roll out one with Chinese characteristics for the mainland,” Chu added.
Mainland Officials Part of Crypto Events
The paper reports that local government officials from Nanjing and Hangzhou have attended web3 events to “learn and observe.”
According to a list of participants seen by the paper, senior execs from mainland banks were among the web3 guests. Officials from China Merchants Asset Management Hong Kong, China Construction Bank International, Industrial Bank, and Commercial Bank of China were part of these events. According to sources, there were representatives from unnamed Chinese institutions as well.
As per those who know the situation, China Merchants Banks’ asset management division, Shanghai Pudong Development Bank, and Fosun Wealth, the Chinese conglomerate’s investment banking and securities division, are among the financial institutions that have shown interest in Hong Kong cryptocurrency projects.
“They have interest if it’s open to retail, not so much if it’s only available to professional investors,” according to one source of the paper.
Businesses that spoke with CNBC concurred.
Justin d’Anethan, institutional sales director at Amber Group, said,
“If anything, China might be looking at the effect on Hong Kong following those rules, the issuance of new crypto-linked products or blockchain-based solutions, and the pick-up of trading and business activity that might ensue.”
However, there will likely be an identity crisis for Chinese businesses.
The paper was informed by a senior executive of a Hong Kong-based securities company that it wouldn’t aggressively market to customers who only have mainland IDs. However, the circumstances will differ if a customer possesses a Hong Kong ID.
Problems Grow After Bank Collapses
After the closing of cryptocurrency-friendly banks Silvergate Bank and Signature Bank, cryptocurrency businesses in Hong Kong are experiencing difficulties.
According to a South China Morning Post story based on sources, local banks are hesitant to work with them. Therefore, cryptocurrency businesses have a harder time opening local accounts. Meanwhile, they are searching for more suitable domestic and foreign banking partners.
Therefore, opening local bank accounts is still challenging for many crypto companies.
According to Joy Lam, a partner at Baker McKenzie in Hong Kong, the region does not prohibit local banks from working with crypto businesses. But the Hong Kong Monetary Authority requires banks to perform due diligence and ongoing monitoring of these clients.
Hong Kong, meanwhile, plans to implement new crypto regulations in June. After that, all the retail traders can purchase, sell, and trade cryptocurrencies without restriction.
Meanwhile, the region is set to introduce new rules in June. After which, it will officially make crypto buying, selling, and trading fully legal for all its citizens. That also includes mainland Chinese institutions. However, the Securities and Futures Commission must grant licenses to cryptocurrency trading sites.
In its plan to regulate trading platforms for virtual assets, the commission has already started a consultation process.
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.
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