Hong Kong proposes to allow retail trading of cryptocurrencies

The Hong Kong government has proposed allowing retail investors to trade cryptocurrencies and crypto exchange-traded funds, which will help the city regain its status as a financial technology hub.

Hong Kong has previously proposed limiting cryptocurrency trading within professional investors, but has faced harsh criticism for stifling innovation, prompting many startups to move to other markets such as Singapore and Dubai.

The city will begin a consultation process to provide retail investors with an “appropriate degree of access” to virtual assets, Hong Kong financial secretary Paul Chan said.

“We want our political position to be clear to the global market: we are demonstrating our determination to explore the fintech space together with the global virtual asset community,” he said.

The government will also consider ownership of tokenized assets and explore the possibility of legalizing so-called smart contracts – that is, automatic transactions whose results depend on pre-programmed inputs.

According to crypto industry participants, these measures could pave the way for the offering of real estate security tokens (or STOs), i.e. blockchain-based tokens that represent the interests of owners or entitle owners to income or dividends from real assets.

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Industry participants want to see consistency in the global regulatory regime, otherwise attackers will be able to exploit loopholes in jurisdictions with less stringent laws.

While Singapore allows retail investors to trade cryptocurrencies, its central bank is discouraging the public from speculative trading in cryptocurrencies and imposing restrictions on the advertising of cryptocurrencies in public places, as well as proposing new rules.

Hong Kong’s recent moves to legalize retail trading in cryptocurrencies also distance Hong Kong from mainland China, which has imposed a total ban on trading in cryptocurrencies.

“This is a positive move as it sends a strong signal that Hong Kong is taking a different approach to regulating its capital market,” said Adrian Wang, chief executive of crypto brokerage Metalpha.

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