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- Hong Kong has revealed that it could be implementing a new law that will only allow professional investors (those with at least $1 million) to invest in Bitcoin.
- The securities watchdog will also have greater oversight over the crypto industry, a move away from the previous regime when regulations were “opt-in.”
All across the globe, regulators have been tightening their policies regarding cryptocurrencies as the industry becomes too big to ignore. The latest is Hong Kong, a global crypto and financial hub which is seeking greater oversight over the industry. Its latest proposal will, among other things, restrict crypto trading to professional investors.
Hong Kong has been conducting consultations on crypto regulations since November last year. The region’s Financial Services and Treasury Bureau has now revealed the findings of its consultations, and they don’t favor retail crypto traders.
As Reuters reports, the FSTB wants to limit this industry to professional investors. In Hong Kong, to qualify as a professional investor, one has to have an investment portfolio that exceeds HK$8 million ($1.03 million.) If the region adopts this law, it will effectively shut out retail traders from the market. This will be a significant blow to an industry that was founded to erode the centralization of power, particularly in the financial services industry.
The FTSB stated, “Confining the services of a VA (virtual assets) exchange to professional investors is appropriate at least for the initial stage of the licensing regime.”
Tighter oversight for exchanges in Hong Kong
Aside from banning retail traders, the regulator also wants to tighten its oversight over exchanges. Currently, exchanges in the region only have to submit to the regulator voluntarily. However, the FTSB wants the Security and Futures Commission to have greater power over the exchanges.
Asley Alder, the CEO of the SFC remarked in a speech:
This is a significant limitation, as under the current legislative framework if a platform operator is really determined to operate completely off the regulatory radar it can do so simply by ensuring that its traded crypto assets are not within the legal definition of a security.
The regulators intend to present the proposed regulations to legislators soon so they can be passed into law.
Granted, greater oversight on exchanges is necessary. The more regulated the industry is, the easier it will be to attract institutional investors. This regulation will also stamp out fraud in the budding industry.
However, the ban on retail traders could end up doing more harm than good. For starters, it would exclude a staggering 93 percent of the Hong Kong residents from crypto. According to a report by the South China Morning Post, roughly 504,000 residents had assets exceeding $1 million. In a region that has close to 7.4 million people, this implies that an overwhelming majority of residents will not be able to invest in crypto.
Leo Weese, the founder of the Bitcoin Association of Hong Kong summed it up:
To restrict retail individuals from accessing Bitcoin would be overshooting the government’s goals of promoting innovation, and financial inclusion.
