Hong Kong wants to allow retail investors to trade in cryptocurrencies

Previously, the city proposed limiting crypto trade to professional investors, which caused several startups to move their operations to other markets such as Dubai and Singapore. Now that the Hong Kong government has reconsidered its stance, authorities will begin a consultation process that would give retail investors a certain degree of access to virtual assets. 

According to Bloomberg, the Securities and Futures Commission revealed several criteria for authorising crypto ETFs, which would only be able to invest in Bitcoin and Ether futures traded on CME Group exchanges. Hong Kong representatives have revealed in a separate policy paper that they will keep a close eye on the risks that might arise for retail investors. They will also support education on the subject and implement regulatory arrangements. 

Other items on the government’s agenda include reviewing property rights for tokenised assets and potentially legalising smart contracts. Official representatives from Worldpay from FIS highlighted the need for a consistent framework for crypto regulation in order to support institutional and retail adoption of digital assets at scale.

Singapore and Japan have taken different measures

The Monetary Authority of Singapore has put forward two consultation papers that aim to minimise the risk of consumer harm from crypto trading while supporting stablecoins. Even though trading in cryptocurrencies is risky and not suitable for the general public, cryptocurrencies play a supporting role in the general digital asset ecosystem, which means that banning them would not be feasible. 

The papers in question cover three main areas: 

• Consumer Access. DPT service providers will be required to provide relevant risk disclosures to enable retail consumers to make informed decisions regarding cryptocurrency trading. They must also disallow the use of credit facilities and leverage by retail consumers for cryptocurrency trading. 
• Business Conduct. DPT service providers will be required to implement proper segregation of customers’ assets, reduce any potential conflicts of interest which arise from the multiple roles they perform, and support processes for handling complaints. 
• Technology Risks. Like other financial institutions such as banks, DPT service providers will be required to maintain high availability and recoverability of their critical systems. 

As far as stablecoins are concerned, the current regulatory framework, which primarily addresses money laundering, terrorism financing risks, and cyber risks, will be expanded to ensure that regulated stablecoins have a high degree of value stability.