Cryptocurrencies have made their mark in the fintech sector in several countries, but have faced regulatory challenges due to the associated risks and volatile nature of the crypto market. Hong Kong is the latest to join the list of Asian regions accelerating efforts to establish a regulatory framework to oversee the crypto sector. The HKSAR Legislative Council announced over the weekend the establishment of a new subcommittee that will devote its time to drafting detailed crypto laws.
Hong Kong aims to become a crypto hotspot
Hong Kong authorities have prioritized making the region lucrative for Web3 companies. After all, despite the financial risks associated with digital assets, the crypto market is currently valued at $2.26 trillion (roughly Rs. 1,88,68,265 crore).
HKSAR member Johnny NG Kit-Chong took to X to announce the creation of a crypto-focused subcommittee. In his post, Kit-Chong revealed that the subcommittee will investigate the regulations from two aspects – one related to Web3 policies and the other related to virtual assets.
From a Web3 policy standpoint, the subcommittee is tasked with balancing Web3 growth against the regulatory framework. This newly formed body will also promote the artificial intelligence (AI) sector.
Meanwhile, policy work around virtual assets will revolve around protecting investors and consumers which could lead to an increase in market confidence.
Other responsibilities assigned to the subcommittee, according to Kit-Chong, include assessing “potential deployment scenarios and risks of stablecoins in Hong Kong, and regulatory systems that ensure financial stability without stifling innovation.”
The authority will also devote time to researching the demand for professional custody services due to the rise of virtual assets in Hong Kong and conducting research on appropriate custody methods and regulatory measures.
Board members are also inviting suggestions from the public that they think can help them oversee Web3 elements like Decentralized Autonomous Organizations (DAOs).
“I welcome the proposals of the global Web3 industry. I will study them in detail and summarize them in order to present them to the Government through the platform of the Legislative Council,” said a member of the HKSAR Legislative Council.
Where is Hong Kong in terms of crypto?
Hong Kong allows the trading and holding of cryptocurrencies, but no cryptocurrencies are recognized as legal tender there. Crypto activities related to individual investors are not subject to tax, however, companies engaged in professional crypto activities are subject to income tax.
According to Triple-a.io, more than 2.45 lakh people, or 3.27 percent of Hong Kong’s total population, currently own cryptocurrencies.
Last month, Hong Kong’s Securities and Exchange Commission (SFC) announced that it would conduct checks to see if all crypto-functional exchanges are complying with the Anti-Money Laundering and Terrorist Financing Regulation (AMLO) as a matter of priority.
Earlier in April, Hong Kong followed the US in approving ETFs linked to Bitcoin and Ether, aiming to boost institutional investor engagement with these otherwise risky digital assets.
