Dr. Ouyang Mo: New York should learn from Hong Kong in cryptocurrency regulation

Author Omer Ozden, CoinDesk; Compiled by RockTree Capital

Under the push of the recent tough attitude towards industry regulation in Washington, DC, companies in the Web3.0 field are fleeing New York. As regulatory agencies have refused the wishes of the city’s leadership, the global relevance of New York relative to other major financial centers is diminishing–but mainland China and Hong Kong have proven otherwise.

Over the past 100-plus days, China and the United States have been taking different paths in cryptocurrency regulation. After 18 months of policy ambiguity, the former seems to have changed, rapidly implementing commonsense cryptocurrency regulations in Hong Kong to promote innovation and encourage industry development.

Omer Ozden is the chairman of the investment fund RockTree Capital in the Web3.0 field. He was previously a securities lawyer practicing in New York and Silicon Valley.

New York City Mayor Eric Adams has embraced Web 3.0 from the beginning and launched activities supporting cryptocurrencies. He even accepted bitcoin payments for his salary at first. This elected official has actively promoted the benefits of Web3.0 and developed a blueprint for the economic recovery of New York, but the bureaucrats in Washington disagreed.

Currently, a few unelected individuals in Washington, DC are exercising shocking dictatorial powers as regulators, which runs counter to New York’s desire to move away from the outdated financial system and toward a digital economy.

The Great Transformation of Hong Kong, China

On April 11, Chief Executive of the Hong Kong Special Administrative Region, Carrie Lam, attended the establishment ceremony of the Hong Kong Web 3.0 Association and delivered a speech.

Lam said that innovative technology is a key area of development in Hong Kong, and we must adhere to technological innovation to promote economic growth.

The development of Web 3.0 is currently at a golden starting point. This disruptive technology can change many existing business operation models and create more new opportunities. In the face of the development trend of Web3, we must dare to become the leader of this wave of innovation.

She believes that Web 3.0 plays a key role in the development of financial technology. At the end of last year, the government issued a policy statement on virtual assets, indicating that the government has an open attitude and a firm determination. The government will establish appropriate supervision for the market, and the new licensing system for virtual asset service providers will be implemented in June to ensure the steady and orderly development of the market.

June 1 saw the implementation of a new framework that provides clarity for brokers, investors, and cryptocurrency exchanges, while also ensuring the participation of retail investors and serving as a testing ground for regulatory and innovative development in other Web 3.0 industries in China. This has also accelerated the recovery of the entire Hong Kong.

The Big Apple is turning sour

New York benefited from Hong Kong’s warning. Now, as U.S. regulators take restrictive measures similar to those China took two years ago, Web3 industries including venture capital funds and projects that Adams is seeking to support have left Silicon Valley and other parts of the United States. Most worrying is the fact that Coinbase, which supports regulation, is also considering leaving the United States due to the current environment. The Web3.0 industry is sensitive!

As part of Hong Kong’s embrace of cryptocurrencies, the regulator has developed a reference guideline for stablecoin issuance, and a stablecoin based on digital Hong Kong dollars is clearly brewing.

In March of this year, U.S. regulators forced Signature Bank to close, despite the bank’s solvency. Former congressman and board member Barney Frank publicly stated that the U.S. authorities’ closure of the bank was politically motivated and aimed at sending a strong anti-cryptocurrency message. Meanwhile, as the U.S. Securities and Exchange Commission sues cryptocurrency exchanges in the United States, Hong Kong has been in contact and lobbying them to establish their businesses in Hong Kong.

Based on my experience as a Web2.0 and Web3.0 investor, as well as decades of experience as a U.S. securities lawyer at major international law firms in New York and China, I believe that legislators need to quickly adopt loose and wise laws, just as engineers need to quickly develop intelligent code, to promote innovation and growth.

The question legislators should consider when formulating the right laws is: How can we promote innovation and economic growth? This is the question Adams has been asking, as well as Li Jiaxiao. Unfortunately, the U.S. Securities and Exchange Commission has framed the United States’ most important regulatory issue as “what is a security?”

Both federal legislators and New Yorkers may suffer similar consequences from this cautionary tale unless they embrace blockchain. This month, Congress representatives proposed the Stable Act to overhaul the U.S. Securities and Exchange Commission and remove Chairman Gary Gensler from office for a series of abusive behaviors. If this unelected chairman unilaterally steers the country in the opposite direction of the desires of the newly elected mayor of the country’s most populous city and tens of millions of American cryptocurrency users, then Adams and his constituents should learn from this experience and take action now, like the people of Hong Kong, because New Yorkers are quickly losing their two favorite things – money and freedom.

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