The rollout of Hong Kong’s new regulatory regime for virtual assets has clashed with intensified US pressure against crypto firms, including the prosecution of two major exchanges this week.
On June 1, Hong Kong’s new virtual asset rules came into effect with local regulators accepting applications for crypto trading platform licenses. Just several days later, the US Securities and Exchange Commission (SEC) shook the industry by suing Binance on June 5 followed by Coinbase on June 6 over various charges.
In the short term, the legal moves could hit market prices and prove untimely for Hong Kong’s debut. But in the longer term, this could further drive crypto firms to choose Hong Kong, or other markets, as their hub of choice.
Price Hit
Since the SEC announced that it was suing Binance, the crypto market has already been experiencing a downturn after beginning a gradual climb in late 2022.
According to CoinMarketCap data, the crypto market is down around 3 percent overall since the SEC’s June 5 announcement while Bitcoin fell as low as $25,730 – the lowest level since March – before regaining some of the losses.
Hub Shift
But in the longer term, some onlookers believe that continued regulatory pressure in the US could drive crypto firms to seek alternative hubs like Hong Kong, especially given its proximity to China.
«Unless, there’s an entire 180-degree reversal on US policy – and very soon – there’s going to be a massive flood of blockchain companies exiting the US over the next few years, and they’re going to need to take their innovation and their tax dollars elsewhere,» according to an «SCMP» report citing Lachlan Feeney, founder and CEO of Labrys, Australia’s largest onshore blockchain consultancy.
Long-Term Commitment
Numerous players are already making moves to take advantage of Hong Kong’s new crypto regime with major exchanges such as Kaiko and Huobi shifting their Asia base to Hong Kong. The Hong Kong Monetary Authority has also been supportive and called on the financial industry to provide banking services to crypto firms.
But not all are convinced about the positive outlook. Bobby Lee, co-founder of China’s first Bitcoin exchange BTCC, warned of the possibility of Hong Kong authorities changing their mind on crypto in a few years.
«[T]he bigger picture is what happens in three years, five years,» said Lee. «I wouldn’t be surprised if Hong Kong did a reversal and put a red light in front of everyone».
