China’s central bank, the People’s Bank of China, has recently highlighted Hong Kong’s active crypto licensing system in its latest Financial Stability report. The report emphasizes the growing prominence of cryptocurrency as an emerging trend in several countries around the world.
According to the Financial Stability Report 2024, the central bank acknowledged the progress of cryptocurrency compliance in Hong Kong. The report noted that 51 countries and regions globally have issued prohibitions on crypto assets, while some economies have adjusted their laws or re-legislated regulations to accommodate the growing trend.
Hong Kong has implemented a “dual license” system for virtual asset trading platforms and operators, categorizing cryptocurrency into security tokens and non-security tokens. Security tokens must adhere to licensing standards set by the Securities and Futures Commission regulatory framework, while non-security tokens must comply with the Anti-Money Laundering bill.
Financial institutions in Hong Kong seeking to provide services related to crypto must apply for registration licenses from financial regulators. Major institutions like the Hongkong and Shanghai Banking Corporation and Standard Chartered Bank are required to include crypto asset exchanges in their daily operations.
Despite these initiatives, Hong Kong has struggled to keep up with Singapore in terms of crypto licensing. Singapore has been praised for accelerating its licensing process, granting licenses to 13 crypto firms in 2024 alone. In contrast, regulatory hurdles have slowed down the license issuing process for crypto firms in Hong Kong, with major exchanges like OKX and Bybit even canceling their license applications.
It is speculated that Hong Kong’s slow licensing process may be influenced by China, where crypto trading activities are banned. Traders in China often use VPNs to access exchanges like Bybit from servers abroad to bypass the ban.
Overall, the report highlights the importance of clear regulatory guidelines and protections for crypto traders within national laws. As the crypto industry continues to evolve, it is crucial for countries like Hong Kong to streamline their licensing processes to remain competitive in the global market.