In a policy shift that contrasts with a crackdown in the US, Hong Kong revealed a plan to allow retail investors to trade digital currencies such as Bitcoin and Ether, taking a major step toward its ambition of becoming a crypto hub.
Individual investors would be allowed to trade larger coins on exchanges licensed by the Securities and Futures Commission, as long as safeguards such as knowledge tests, risk profiles, and reasonable limits on exposure are in place, according to a consultation paper released by the regulator on Monday.
The agency made no mention of which large-capitalization tokens will be permitted for regular investors. Instead, it stated that the coins must be included in at least two acceptable, investible indices from independent sources, at least one of which must have experience in the traditional financial sector.
The consultation period will expire on March 31, and the goal is to allow retail trading in the new crypto exchange licensing regime, which will go into effect on June 1. Bitcoin and Ether, the two most valuable digital assets by market cap, are likely to be listed by Hong Kong platforms, according to an SFC spokeswoman at a briefing.
Hong Kong switched to a pro-crypto attitude towards the end of October, as part of a larger push to reestablish the city’s credentials as a financial centre. Authorities hope to use last year’s $1.5 trillion digital-asset crisis and a string of worldwide bankruptcies, such as the collapse of the FTX exchange, to develop a mandated regulatory framework that can entice firms while protecting investors.
The consultation paper did not name any specific crypto indexes as a starting point for a taxonomy of authorized tokens. Exchanges would be responsible for monitoring listed assets to ensure they are suitable for trading by ordinary investors.
The government has previously permitted exchange-traded funds to participate in CME Group Bitcoin and Ether futures, and it issued its first digital green bonds this month.
As a series of crypto probes in the US casts doubt on the country’s position as an industrial heartland, digital-asset executives are increasingly driven to friendlier legislative environments such as Hong Kong, Dubai, and Europe.
