Regulation
Crypto regulations drive exchanges away from Hong Kong
In a recent crypto opinion piece published in the Hong Kong Economic Journal, Duncan Chiu, a member of the Hong Kong Legislative Council, raised concerns over the strict regulations imposed on crypto exchanges in the region. Chiu’s comment follows major global exchanges withdrawing their license applications, citing regulatory hurdles that have stifled market growth and weakened investor confidence in Hong Kong’s crypto ecosystem.
The Securities and Futures Commission (SFC) requires that cryptocurrency trading platforms that have not submitted license applications by February 29 must cease operations in Hong Kong by May 31. After this deadline, all virtual asset trading platforms (VATPs) must either obtain an SFC license or be considered unauthorized.
Chiu Underlines the negative impact of these regulations on market development, saying they lack a comprehensive strategic approach to foster Hong Kong’s virtual asset market. He criticized disparate policies governing various aspects of the industry, including VAT, stablecoin issuance and over-the-counter trading, which hamper consistent growth.
Additionally, Chiu noted gaps between regulatory requirements and the innovative nature of Web3 finance. The SFC’s insistence on standards similar to those of traditional financial institutions appears “excessively strict” and inconsistent with the decentralized and agile nature of financial markets.
Missing technical expertise in crypto monitoring
Another major concern raised by Chiu is the disparity in technical skills between regulators and industry operators. Although regulators require extensive experience from management teams, they often lack personnel with practical knowledge of how Web3 companies operate. This mismatch complicates communication and prevents effective regulation tailored to the unique needs of the crypto industry.
The withdrawal of license applications by major global exchanges such as OKX, Gate.io and HTX highlights the urgency of addressing these regulatory challenges. Chiu called for a forward-looking vision that embraces innovation and flexibility, urging authorities to collaborate with industry stakeholders to design a regulatory framework conducive to sustainable growth in Hong Kong’s crypto landscape.
As Hong Kong navigates the evolving dynamics of the digital economy, striking a balance between regulatory oversight and fostering innovation will be key to positioning the region as a hub for crypto innovation.