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**Hong Kong Regulators to Review Crypto Requirements: Insights Revealed**
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Jimmy Aki
Last updated:
July 3, 2024, 14:30 EDT
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2 min read
Christopher Hui, Hong Kong’s Secretary for Financial Services and the Treasury, announced on July 3rd that regulators in Hong Kong will closely monitor market developments following the withdrawal of license applications by several global cryptocurrency exchanges.
**Policy Review Triggered by License Withdrawals**
Hui shared regulatory perspectives on cryptocurrencies amidst recent developments, stating that Hong Kong’s regulatory bodies, including the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC), will closely observe market trends related to virtual assets (VAs).
The statement was made in response to inquiries from lawmakers regarding potential revisions to crypto licensing requirements, prompted by major global exchanges withdrawing their license applications.
Hui clarified that licensed corporations and registered institutions may distribute crypto-related products without altering their licensing conditions, provided they inform Hong Kong regulators.
**Context of Hui’s Statements and the New Capital Investment Entrant Scheme**
Hui’s comments are set against the backdrop of the New Capital Investment Entrant Scheme (New CIES), launched on March 1 to attract foreign investments and talent to Hong Kong. Since its inception, the New CIES has received over 300 applications, with approvals granted based on net asset assessments and investment criteria.
Applicants for the New CIES must demonstrate at least HK$30 million in net assets or equity for the two years preceding their application. This requirement may have influenced several global exchanges to withdraw their applications in recent months.
For example, HTX withdrew its Hong Kong crypto trading license application for the second time, while Gate.io abandoned its trading license application on May 23, planning to delist tokens by August 28. Though the exact reasons for these actions remain unclear, this requirement likely played a role.
Similarly, OKX withdrew its Virtual Asset Service Provider (VASP) license application on May 31 and halted trading services for local residents. These withdrawals prompted scrutiny and criticism from members of Hong Kong’s Legislative Council, including Wu Shuo, who raised concerns about the crypto licensing system’s impact on market confidence and Hong Kong’s virtual asset market development direction.
**Regulators’ Concerns Over Crypto Scams Surge**
One of the aims of the New CIES crypto regulations is to safeguard local investors from fraudulent activities. The regulations mandate companies to conduct crypto knowledge assessments for customers and educate them about the risks associated with trading crypto assets.
This is crucial as the incidence of crypto scams continues to rise in Hong Kong. In March, a 46-year-old housewife in Hong Kong reported losing HK$7.1 million ($908,000) after investing in a fraudulent crypto platform. The scam began in July 2022, with scammers contacting her via Instagram and convincing her to invest in cryptocurrencies through a deceptive trading platform. Another cybercriminal, posing as a customer service representative, persuaded her to transfer over $900,000 across 15 bank accounts from August 19, 2022, to March 4, 2023.
Hong Kong police have also observed a surge in crypto investment scams as digital assets gain popularity in the region. Financial losses from these scams rose by 42.6% to HK$3.26 billion last year, up from HK$926 million in 2022. Reported cases also increased significantly, from 1,884 in 2022 to 5,105 in 2023.
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