Hong Kong takes a positive stance on crypto relative to the US Hong Kong takes a positive stance on crypto relative to the US Hong Kong takes a positive stance on crypto relative to the US

Hong Kong takes a positive stance on crypto relative to the US

Mads Eberhardt

Cryptocurrency Analyst

Summary:  As the US cracks down on crypto, Hong Kong takes a more positive stance on crypto, following its plan to evolve into a crypto hub, starting by allowing retail investors to trade certain cryptocurrencies. The opposing views on crypto regulation stress that the present regulatory course is somewhat zero-sum, taking one step forward, followed by one step back.


In the past few weeks, the Securities and Exchange Commission (SEC) in the US has initiated a crackdown on crypto intermediaries, including highly regulated US-based entities such as Kraken and Paxos. At the outset, the agency forced crypto exchange Kraken to shut down its staking service and its intention to file a lawsuit against stablecoin issuer Paxos over its Binance-branded stablecoin was disclosed.

Not only US-regulated entities have caught the attention of the SEC. On Thursday, the agency charged the offshore company Terraform Labs and its foreign founder by the name Do Kwon with fraud due to its doomed cryptocurrency and its associated algorithmic stablecoin known as Terra and UST, respectively. In the span of a few days, both cryptocurrencies blew up as they entered a death spiral last year, wiping out a combined $58bn market capitalization at the immense expense of investors worldwide. The SEC alleges that Terraform Labs and Do Kwon misled investors about the stability of the stablecoin.

Hong Kong takes an opposing but positive stance

In 2018, Hong Kong introduced legislation forbidding exchanges and intermediaries from offering crypto trading to retail investors. However, relative to the recent strict approach by the SEC, Hong Kong’s equivalent agency namely the Securities and Futures Commission (SFC) has recently turned more crypto-friendly after Hong Kong in October last year stressed its ambition to attract the crypto industry to restore its hub as a financial center.

On Monday, the first confirmation of a new course on crypto in Hong Kong became evident, as the SFC proposed new rules for crypto intermediaries, allowing them to operate in the country more freely if they obtain a license. The license is planned to come with regulatory oversight and obligations such as capital requirements, due diligence on tokens, and limits to clients’ exposure to ensure it is within their risk profile. These rules do not appear to be out of the ordinary compared to regular bank regulation. Most prominently, the rules are set to allow retail to once more trade certain large cryptocurrencies, likely at least Bitcoin and Ethereum. This is nothing but positive for the crypto market, as it allows for not only more adoption but crypto innovation too in Asia.

One step forward, one step back

In view of the more negative regulatory sentiment to crypto in the US relative to Hong Kong, the crypto market continues to stay in a zero-sum environment, as it appears that the market altogether does not move in any direction on regulatory matters. There is surely made positive progress in some areas and countries, but it is rather offset by negative trends among other areas and countries. In our view, this regulatory zero-sum environment is not likely to change for the better in the foreseeable future, as countries are yet to figure out by what means they should regulate crypto. This implies that the regulatory journey for crypto is set to continue to be volatile with negative news one week and positive ones the next.

Disclaimer

The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Trading in financial instruments carries risk, and may not be suitable for you. Past performance is not indicative of future performance. Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.