TL;DR
• Hong Kong SFC chairman, Carlson Tong Ka-Shing claims that regulating cryptocurrency exchanges is better than banning trading.
• Cryptocurrency trading ban would be ineffective since it would only push investors towards overseas markets.
• Hong Kong-based exchanges are required to comply with regulations to ensure investors’ protection.
A new statement was recently given by Hong Kong SFC chairman, Carlson Tong Ka-Shing, in which he claims that crypto trading in Hong Kong should not be banned. Instead, he believes that new regulations are in order, which will tighten security, and protect investors.
The Hong Kong SFC (Securities and Futures Commission) continues to search for new effective methods of
regulating crypto operators. While important, the Commission’s goal is made more difficult since they are technically only allowed to regulate securities. Despite this, Tong Ka-Shing says that the SFC will keep an eye on this industry.
He believes that banning cryptocurrency trading in Hong Kong would not solve current problems. Not only is the crypto trading growing more and more popular, but is also an international activity. As such, introducing a trading ban in Hong Kong would force traders to seek out foreign markets.
Tong also claims that crypto trading venues are similar to traditional stock exchanges in a lot of ways. As such, they also require a comparable licensing regime. After the basic framework is enforced, the city would be able to update it and make it compatible with new market developments.
Over time, the SFC has issued several warnings to cryptocurrency traders in Hong Kong. These warnings addressed the unregulated nature of crypto exchanges, as well as dangers of trading on unregulated platforms. Additionally, they also issued notices to trading platform operators — often a company or a group of individuals — stating that complying with regulations is in everyone’s best interest.
Tong claims that some of these cryptocurrency companies still do not fit the custodian, audit, or even valuation requirements. Not only that, but these platforms also represent a new technology that has yet to be adequately understood by regulators. This is why a regulatory approach needs to be carefully considered. Even so, enforcing regulations is a better option than the alternative, which is a ban on trading.
Imposing a total ban is neither the right approach nor would it work considering that the possibility of trading in overseas markets is efficiently conducted via today’s internet.
While Tong is expected to hand over the reins of the SFC to Tim Lui Tim-Lueng later this week, he still gave one last warning to unregulated exchanges in Hong Kong, claiming that the SFC will continue to observe them.
Soon after Tong gave his statement, the representatives of several Hong Kong-based exchanges responded. One of them was the chief operating officer of BitMEX, Angelina Kwan. Kwan welcomed the idea of regulating cryptocurrency exchanges, believing that regulatory authority can help with shaping the cryptocurrency industry. She also gave an example where exchanges were able to benefit from regulations, mentioning the US introducing regulations which led to futures trading by the CBOT and CME Group.
The Hong-Kong based margin trading exchange, BitMEX, is still unregulated. More than that, traders can start trading by signing up with no required KYC process. There is no doubt that regulations will favor the traders that have suffered lots of weird Bitmex incidents over the last year. In the recent known case, Bitmex had planned maintenance, Bitcoin was pumping and raising, and at the moment Bitmex went live again – there was a mass-liquidation event that drove Bitcoin $300 higher. Such as event will likely not happening under regulations.
