Hong Kong Proposes Restrictions On Crypto Exchanges

After a volatile few weeks for Bitcoin, Hong Kong has announced plans to restrict crypto trading services to professional investors. Brokers operating in Hong Kong will also have to hold a license with the city’s markets regulator.

Governments and regulators are still debating how to respond to the surge in popularity of cryptocurrencies. With a boom in retail trading in recent years and new tokens emerging each week, countries are grappling with the right approach.

Investor protection and money laundering are high on the list of concerns for regulators. Bitcoin has seen a series of peaks and troughs in recent weeks, even by its usual standards. This adds to questions about the stability and longevity of cryptos. There are also rising concerns about the environmental impact of mining digital currencies.

Hong Kong Cracks Down On Cryptos

There are currently dozens of crypto exchanges operating in Hong Kong, including leading brands. The city has thus far been operating under an ‘opt-in’ approach where exchanges can choose whether to apply for a license from the Securities and Futures Commission.

Over the last year or so, Hong Kong’s Financial Services and the Treasury Bureau (FSTB) has been considering whether new rules were needed and have decided that all crypto brokers will now need to hold a license if they wish to operate in Hong Kong.

The proposals have also stated that “confining the services of a VA exchange to professional investors…. is appropriate at least for the initial stage of the licensing regime.” This won’t be welcome news for many retail traders with critics arguing the change could force brokers out of Hong Kong and investors towards unregulated providers.

Note, a client must hold at least HK$8 million ($1.03 million) to count as a professional investor according to Hong Kong laws.

The FSTB’s latest legislative proposals, should they be approved, will come into law in the 2021-22 session of the city’s assembly.

What Does This Mean For Traders?

For now, retail crypto traders in Hong Kong will still be able to trade the likes of Bitcoin, Ripple and Litecoin on popular exchanges. However, should the draft proposals make their way into law, investors that don’t meet the professional capital threshold may need to turn to alternative providers.

See our guide to cryptocurrency trading, including our list of leading exchanges.