Hong Kong Considers Extending Crypto Trade to the Retail Market

In an effort to recover its fintech leadership, Hong Kong's government has proposed allowing retail investors to trade in cryptocurrencies.

The government will review allowing retail investors “a suitable degree of access” to digital assets, Financial Secretary Paul Chan said at the Hong Kong Fintech Week conference.

The city, which previously proposed restricting crypto trade to professional investors, has seen proposed digital asset rules heavily criticized for stifling innovation, prompting a slew of start-ups to relocate to other markets such as Singapore and Dubai.

“We want to make our policy stance clear to the global market, to demonstrate our determination to explore fintech with the global virtual asset community,” he said.

The government will also review property rights for tokenized assets and explore legalizing so-called smart contracts – self-executing transactions whose results depend on pre-programmed inputs.

Real Estate Tokens
These moves are likely to pave the way for real estate security token offerings (STOs), industry players said. STOs are blockchain-based tokens that represent ownership interests or entitle holders to income or dividends generated from real assets.

The latest announcement could put Hong Kong’s rules on a par with those of Singapore, said Andy Mehan, chief compliance officer for APAC at US crypto exchange Gemini.

“Industry participants want to see consistency in the global regulatory regime, otherwise there will be opportunities for bad actors to exploit loopholes in jurisdictions with less rigid laws,” he said.

Diverging From China
Hong Kong’s latest move to legalize retail crypto trade would also set Hong Kong further apart from mainland China, which has imposed a blanket ban on cryptocurrency trade.

While Singapore allows retail investors to trade in cryptocurrencies, its central bank has been discouraging the public from speculative trading in cryptocurrencies and brought in restrictions on the advertising of cryptocurrency services in public places.

“This is a positive move as it sends out a strong message that Hong Kong is taking a different approach in regulating its capital market,” said Adrian Wang, chief executive of crypto brokerage Metalpha.