Hong Kong set to be global crypto hub after Chinese ban
Chinese ban on cryptos could trigger boost for Hong Kong
China's ban on cryptocurrencies could see Hong Kong becoming a crypto hub, attracting digital firms, miners and investors, if the Chinese government allows it.
The People’s Bank of China and Chinese local authorities have banned virtual currencies in mainland China, declaring that “they are strictly prohibited and resolutely banned by law”.
Alibaba.com has prohibited the sale of both cryptocurrency miners and mining software, as well as the sale of virtual currencies such as bitcoin and ethereum.
The crypto ban could trigger favourable conditions for Hong Kong, allowing one of the world's leading commercial centres to become the next Asian crypto hub – providing the ban isn't extended to the semi-autonomous region.
However, from 2022 Hong Kong will tighten the rules on cryptocurrencies, introducing a new regulation for Virtual Assets Service Providers (VASPs).
“The requirements are quite clear. Some of them will ask crypto businesses to operate in Hong Kong under particular scrutinies, like a physical presence in Hong Kong, and will limit the business model so only professional investors will be allowed,” said Vitaliy Kedyk, Currency.com's head of strategy.
A fertile ground for Hong Kong
“Further development in the region very much depends on the exact requirements and the authorisation procedures which the regulator puts in place,” added Kedyk.
"There are successful cases in the industry, such as Estonia or Gibraltar, which de-facto are the leaders in Europe for registered crypto businesses, and there are cases where the regulator is driving businesses away with uncertainty, such as the UK.
“Hong Kong definitely has the potential to be one of the main global crypto hubs, but we'll see what happens when the regulatory regime comes into force.”
Hong Kong's experiment with CBDCs
Meanwhile, the former UK crown colony has taken part in the mBridge project, a cooperation between the BIS Innovation Hub Hong Kong Centre, the Hong Kong Monetary Authority, the Bank of Thailand, the Digital Currency Institute of the People's Bank of China and the Central Bank of the United Arab Emirates.
The prototype of multiple central bank digital currencies (mCBDCs) developed by the BIS Innovation Hub and the four central banks demonstrated the potential for using digital currencies and distributed ledger technology for delivering real-time, cheaper and safer cross-border payments and settlements, BIS reported.
“The common prototype platform for mCBDC settlements was able to complete international transfers and foreign exchange operations in seconds, as opposed to the several days normally required for any transaction to be completed using the existing network of commercial banks, and operate on a 24/7 basis. The cost of such operations to users can also be reduced by up to half,” said BIS.