Major Asian Cities Hong Kong and Singapore Taking the Lead in Profiting from Cryptocurrency Boom

HONG KONG: Hong Kong and Singapore are leading the way in the race among Asian governments to establish themselves as cryptocurrency hubs, taking advantage of the global resurgence in the sector with the support of US President Donald Trump.

Bitcoin recently reached a record high of nearly $110,000, while other cryptocurrencies have also surged due to Trump’s pro-crypto stance.

With predictions of further growth, governments are eager to get involved in the action.

Hong Kong regulators announced on Wednesday that the city must tap into “global liquidity” and outlined plans that include the potential offering of riskier crypto products like derivative trading and margin financing.

“The key word we always need to consider is liquidity,” said Eric Yip, an executive director at the Securities and Futures Commission (SFC), at a financial industry conference in the city.

The collapse of the FTX exchange in 2022 led to the loss of around $8 billion from customers who used it for cryptocurrency transactions. Although the funds were later recovered, regulators worldwide are eager to prevent a similar incident, prompting the sector to shift towards regulation and away from its initial anti-establishment roots.

Officials emphasize the importance of protecting investors while also hoping that their regulations will be conducive to business.

Authorities in Malaysia and Thailand are considering changes in crypto-related policies, while Japan, South Korea, and Cambodia have taken small steps in this direction, as reported by Bloomberg News.

Hong Kong and Singapore, along with Dubai in the Middle East, have solidified their positions as frontrunners during a period when US regulators under the Biden administration were hesitant towards crypto.

In a recent executive order, Trump, who has vowed to make the US the “crypto capital of the world,” stated that he will focus on providing regulatory clarity and certainty to support blockchain and digital asset innovation.

Evan Auyang, group president of Animoca Brands, mentioned that the anticipated changes in the US regulatory environment will influence regulators globally.

The Monetary Authority of Singapore has issued “Major Payment Institution” licenses related to digital payment tokens to 30 companies, including OKX. Singapore has been proactive in regulating digital assets, such as through initiatives like the 2022 Project Guardian that involved collaboration with major global banks to explore asset tokenization.

Meanwhile, Hong Kong has granted “Virtual Asset Trading Platform” licenses to 10 companies and is seen as the second-most crypto-friendly jurisdiction behind Singapore, according to Auyang from Animoca.

Despite having fewer exchanges, Hong Kong saw a significant increase in value received over the past year, surpassing Singapore in terms of transaction value.

Hong Kong revamped its legal framework for crypto exchanges in mid-2023, with the SFC taking charge of vetting and licensing. Although China has banned cryptocurrencies since 2021, exchanges in Hong Kong cannot serve mainland Chinese clients.

Yat Siu, executive chairperson of Animoca Brands, stated that pro-crypto policies in Hong Kong have the approval of Beijing and that the city benefits from being China’s financial gateway.

Aside from exchanges, the SFC announced its intention to explore regulations for custody services, staking, and over-the-counter trading.

“Hong Kong is not sitting idly by while observing the US,” Siu said. “It actually incites more action.”

However, regulators in Hong Kong have discovered that the devil is in the details. Some companies have faced challenges in hiring compliance staff, and the SFC vetting team is understaffed, leading to delays in the regulatory process.

“The SFC has been in a difficult position,” said regulatory lawyer Jonathan Crompton. “People have criticized that they are not quick enough to implement regulation while also failing to provide adequate protection.”

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