Author: Sarah Zheng, Suvashree Ghosh, and Kiuyan Wong; Bloomberg; Translation: Song Xue, LianGuai
The first license under Hong Kong’s new cryptocurrency regime has been awarded to HashKey Exchange, legalizing retail token trading in Hong Kong as the city seeks to establish itself as a global hub for digital assets.
In a statement on Thursday, the company said that with the upgraded existing license, HashKey will be able to “expand its business scope from serving professional investors to retail investors.” The Securities and Futures Commission has not confirmed the announcement yet.
Hong Kong launched its cryptocurrency framework in June as part of efforts to restore its image as a cutting-edge financial center. The move has generated significant interest and stands in sharp contrast to the crackdown on digital assets in the United States, but Hong Kong has yet to attract substantial investments from an industry hit hard last year by market declines.
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HashKey has stated that it is partnering with Standard Chartered Bank to provide fiat currency deposit and withdrawal services. The company has also announced the launch of over-the-counter trading services for virtual assets.
Under an earlier voluntary licensing scheme in Hong Kong, HashKey and its competitor OSL are the only two licensed cryptocurrency exchanges.
HashKey Group’s business encompasses venture capital, asset management, and trading, among other areas. According to Bloomberg, the company is in early-stage negotiations for a financing round of $100 million to $200 million, with a valuation exceeding $1 billion.
Under Hong Kong’s new regulations, cryptocurrency exchanges can offer trading services to individuals and institutions, provided they obtain and comply with licenses aimed at curbing risk behavior exposed by the 2022 crash and the collapse of the FTX platform.
Retail investors are limited to investing in major tokens such as Bitcoin and Ethereum, which must be included in at least two recognized investable indices. The requirements for risk assessment, insurance, and asset custody may increase the operating costs of exchanges.
Following a $1.8 trillion drop in token prices from their 2021 peak and thousands of job losses, cryptocurrency companies are exercising caution in new investments.
In a Bloomberg survey in May, 15 major digital asset institutions, including major exchanges accounting for the vast majority of cryptocurrency trading volume, did not provide detailed plans for specific investments in Hong Kong.
Meanwhile, the Securities and Futures Commission has received dozens of inquiries, and cryptocurrency companies such as Huobi, OKX, and Amber Group have indicated plans to apply for licenses.
With clearer regulations in the Asian region, the digital asset industry is increasingly turning to Asia for growth opportunities. Hong Kong, Japan, Singapore, and South Korea are all jurisdictions seeking to attract cryptocurrency businesses.
They are facing competition from countries such as Dubai and the European Union. At the same time, the United States is caught in a fog of cryptocurrency caused by conflicting court rulings, turf wars between regulatory bodies, and legislative disputes.