Hong Kong paves the way for retail investors to trade crypto, with plans to launch trading platforms in the second half of the year.
Hong Kong is set to permit retail trading of cryptocurrencies in the second half of 2023, according to an announcement made by the Securities and Futures Commission (SFC). Starting from June 1, SFC will begin accepting applications from exchanges to provide such services.
This move reflects Hong Kong’s ambition to position itself as a crypto industry hub, despite the cautious approach taken by other jurisdictions after the FTX cryptocurrency exchange collapse last year.
During a press conference, Keith Choy, the SFC’s interim head of intermediaries, stated that retail trading platforms for cryptocurrencies are expected to be available in Hong Kong later this year. Choy added that the exchanges themselves would determine which cryptocurrencies to offer, emphasising the importance of selecting assets with significant market capitalisation and high liquidity.
Hong Kong’s licensed crypto exchanges, HashKey Pro and OSL, have already established partnerships with local securities brokers to enable professional investors to trade crypto assets. However, after June 1, unlicensed exchanges will be prohibited from selling cryptocurrency products to retail or professional investors in the city, following the implementation of an updated anti-money laundering law.
Victory Securities, a partner of OSL, has observed an increase in retail client inquiries and is preparing to facilitate crypto trading for them. HashKey Pro, on the other hand, permits professional investors to trade bitcoins, Ethereum coins, and stablecoins pegged to the US Dollar. Both exchanges are seeing a consistent influx of inquiries, although specific transaction figures and broker names were not disclosed.
By allowing direct retail trading of digital coins, Hong Kong aims to attract exchanges and fund companies to the city. In late 2022, regulators permitted retail investors to trade bitcoin and Ethereum futures on the Chicago Mercantile Exchange through exchange-traded funds listed on Hong Kong’s bourse. The three exchange-traded funds for bitcoin and Ethereum futures currently have a combined total of US$43.1 billion in assets.
BTSE, a digital asset exchange based in Taipei, intends to apply for a licence to operate in Hong Kong. Its CEO, Henry Liu, hopes that the Hong Kong securities watchdog will further open up opportunities for margin trading, derivatives trading, and retail trading of stablecoins.
Nevertheless, the crypto industry in Hong Kong faces practical obstacles, such as difficulties in opening bank accounts. Many crypto companies have reported struggles in this regard. In response, the Hong Kong Monetary Authority held a meeting in April urging banks to allow crypto-related companies to open accounts for operational purposes, including salary payments.