Government Official: FTX Collapse Will Not Stop Hong Kong Becoming Virtual Asset Hub

The abrupt collapse of major crypto exchange FTX has shaken the cryptocurrency markets across the world, but it wil not hamper Hong Kong’s plans of establishing itself as a crypto hub, according to the city’s Financial Secretary Paul Chan.

A recent string of bankruptcies by a number of crypto businesses which fold “one after another” makes the case for enhanced transparency and tighter regulation within the industry, Chan wrote in a recent blog post, as reported by The South China Morning Post.

“Our policy statement released recently is conducive to building such an environment, and has made the industry very hopeful about the development of Hong Kong’s virtual asset market,” according to the senior official who has served as Hong Kong’s financial secretary since 2017.

The prices of nearly all major cryptos crashed last week after it was unveiled that FTX would be acquired by rival exchange Binance in a bizarre turn of events. Binance’s CEO Changpeng 'CZ' Zhao declared that the takeover would allow to relieve pressure on FTX’s liquidity.

“This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire FTX.com and help cover the liquidity crunch,” Zhao tweeted.

Meanwhile, in spite of the claims made by Chan, the latest announcement comes as crypto investors are increasingly worried about Hong Kong’s regulatory ambiguity on digital assets and potentially negative legislative proposals.

The Chinese city’s lawmakers are advancing plans to require licensing for crypto trading platforms through an amendment to Hong Kong’s anti-money laundering legislation. This would require firms to offer such services exclusively to professional investors with a portfolio of at least HK$8 million (US$1 million). Should the legislative proposal go through, the decision could discourage numerous crypto investors from performing their business in Hong Kong.

At the same time, earlier this month, Hong Kong’s top securities regulator suggested it will pursue plans to enable retail investors to access exchange-traded funds (ETFs) which track cryptoasset futures. The Securities and Futures Commission (SFC) has already issued a “consultation paper” that consists of the proposed guidelines and rules for crypto ETFs.

Earlier in 2022, the securities regulator released a joint statement with the city’s central bank, the Hong Kong Monetary Authority. The declaration made reference to providing retail investors with access to a “limited suite” of crypto-based financial products.