By Georgina Lee
HONG KONG (Reuters) – Hong Kong’s government has proposed allowing retail investors to trade cryptocurrencies and exchange-traded funds, a move it hopes will help it regain its status as a fintech hub.
The city, which previously proposed restricting crypto trading to professional investors, has come under fire for planned regulations for digital assets for stifling innovation, prompting many startups to move to other markets such as Singapore and Dubai.
Authorities will begin a consultation process on giving retail investors “an appropriate degree of access” to virtual assets, Finance Minister Paul Chan said in a keynote address broadcast at the Hong Kong Fintech Week conference.
“We want to communicate our policy position to the global market to demonstrate our determination to explore fintech with the global virtual asset community,” he said.
The government will also review the ownership rights of tokenized assets and explore the possibility of legalizing so-called smart contracts – self-executing transactions whose results depend on pre-programmed inputs.
The moves are likely to pave the way for Security Token Offerings (STOs), industry players said. STOs are blockchain-based tokens that represent shares of ownership or entitle holders to profits or dividends generated from real assets.
The latest announcement could put Hong Kong’s rules on par with Singapore’s, said Andy Meehan, director of APAC compliance at US crypto exchange Gemini.
“Industry participants want to see consistency in the global regulatory regime, otherwise there will be opportunities for bad actors to exploit loopholes in jurisdictions with less stringent laws,” he said.
Legalizing retail cryptocurrency trading would also further separate Hong Kong from mainland China, which has imposed a blanket ban on cryptocurrency trading.
“This is a positive step 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 Metapha.
($1 = HK$7.8492)