Hong Kong to allow retail traders to put money on larger crypto tokens

• A plan to permit ordinary investors to trade digital currencies like Bitcoin and Ether was presented in Hong Kong.
• Towards the end of October, Hong Kong adopted a pro-crypto stance as part of a bigger effort to restore the city’s reputation as a financial center.

In a policy shift that contrasts with a crackdown in the United States, Hong Kong unveiled a plan to allow retail investors to trade digital currencies like Bitcoin and Ether, taking a significant step towards its ambition of becoming a crypto hub.

Providing measures including knowledge tests, risk profiles, and appropriate exposure limits are put in place, individual investors would be allowed to trade larger currencies on exchanges registered by the Securities and Futures Commission, the regulator said in a consultation document on 20 February.

New points on regulations

The names of the coins that will be accessible to regular investors were not specified. 

The goal of the March 31–April 31 comment session is to permit retail trading under the new crypto exchange licensing regime that will go into effect on June 1.

According to an SFC spokeswoman, Hong Kong platforms are expected to list Bitcoin and Ether, the two largest digital assets by market value.

As part of a larger initiative to reestablish the city’s credentials as a financial center, Hong Kong switched to a pro-crypto attitude at the end of October last year.

To develop a required regulatory framework that can attract businesses and safeguard investors, officials are hoping to draw lessons from last year’s $1.5 trillion digital asset crash and a wave of worldwide bankruptcies, including the collapse of the FTX exchange.

Exchange-traded funds (ETFs) trading in Bitcoin and Ether futures from CME Group are already permitted by the government, and this month saw the sale of the first-ever digital green bonds.

New rules for crypto trading platform

In other news, the Securities and Futures Commission (SFC) of Hong Kong released its draft regulations for virtual asset trading platforms on Monday and is now accepting public feedback.

Any cryptocurrency trading platforms, including those that already exist, that want to apply for a license under the new regime “should begin to assess and adapt their systems and procedures to prepare for the new regime,” the notice stated.

Hong Kong still faces many challenges, including a slowdown in the virtual asset sector that has resulted in thousands of job losses. After the bust in 2022, the crypto markets have only partially recovered.

Businesses can be reluctant to invest their limited resources until the outline of Hong Kong’s policy landscape is more apparent.