On Friday, the Hong Kong Financial Services and Treasury Bureau proposed two major pieces of crypto regulation:
- One, that crypto exchanges be licensed compulsorily by the regulator and subject to money laundering and anti terror financing checks
- Two, that these exchanges only offer services to ‘professional investors’ in HK. That is, people with a portfolio over one million USD.
I dug up the actual proposal text, which is the conclusion of a ‘consultation’ held with ‘stakeholders’ between Nov 2020 and Jan 2021. [link to PDF]. It has a couple of important points that is left out of the Reuters article.
One, it defines virtual assets, which will be traded on these licensed exchanges, very generously:
a digital representation of value that (i) is expressed as a unit of account or a store of economic value; (ii) functions (or is intended to function) as a medium of exchange accepted by the public as payment for goods or services or for the discharge of a debt, or for investment purposes; and (iii) can be transferred, stored or traded electronically.
I wonder if by this, the proposed regulation allows payment for goods, and payback of loans via tokens, as well as investment products to be created? If so, this’ll be a big step towards programmable money.
Two, it explicitly leaves out some important tokens: stablecoins, central bank digital currencies (like the in-trial Chinese e-yuan), and items like non-fungible tokens (among others). That is, crypto exchanges in HK cannot list these. I think this is because digital currency will be separately regulated.