Hong Kong’s SFC chief says crypto trading is an important part of the virtual asset ecosystem

Julia Leung Fung-yee, CEO of Hong Kong’s Securities and Futures Commission (SFC), addressed Hong Kong adopted Web3 regulation following the collapse of crypto exchange FTX last November, noting that crypto trading is an important part of the virtual asset ecosystem.

During a recent speech, Leung reportedly explained that the new licensing system for virtual asset providers will ensure that investors are protected while taking into account the risks faced by financial institutions. In Major’s view, incorporating virtual asset providers into the regulatory system was the only way to drive innovation adoption and strengthen market confidence following the FTX bankruptcy.

Hong Kong used the FTX collapse to reduce the regulatory risks associated with centralized exchanges. In December, about 30 days after the exchange crisis unfolded, its Legislative Council included virtual asset service providers in the same law that regulates traditional financial institutions.

Related: Hong Kong Government Pressures Banking Giants to Accept Crypto Customers

The new regulations bring stricter AML guidelines and investor protection laws for virtual exchanges looking to open business in Hong Kong. It also introduces a new licensing scheme that gives retail investors the ability to trade in virtual assets. Until recently, trading in digital assets was limited to professional investors and traders with bankable assets of at least $1 million.

According to Leung, Hong Kong’s cryptocurrency licensing system is a good example of China’s “one country, two systems” policy. Cryptocurrencies have been banned in Mainland China since 2021, while Hong Kong has taken a different approach by promoting a welcoming environment for crypto business.

Over the past 12 months, more than 150 Web3 firms have set up operations at Hong Kong’s Cyberport – a digital hub created by the local government to foster innovation. The influx came after the government allocated 50 million yuan ($7 million) to speed up Web3’s development.

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