On August 3, HashKey and OSL trading platforms announced the official upgrade of licenses No. 1 and 7, becoming Hong Kong’s licensed trading platforms for retail users. In addition to providing support for legal currency deposits and withdrawals, the HashKey trading platform will also cooperate with Standard Chartered Bank, Morgan Stanley Asia ZA BANK, etc. to provide users with legal currency deposit and withdrawal services. In addition, the platform also opens compliant OTC transactions. After retail trading is opened, what else will we see in the next year?
1. What coins may be open to retail trading?
According to new regulations issued by Hong Kong in March, licensed platform operators who intend to provide virtual assets to retail customers should also ensure that the selected virtual assets are eligible large-scale virtual assets and meet the following specific token inclusion criteria: " "Eligible large-scale virtual assets" refer to virtual assets that are included in at least two "accepted indices" launched by at least two independent index providers; the licensed platform operator should ensure that at least one of the two indices Launched by an index provider with experience in publishing indices for traditional non-virtual asset financial markets, such as an index provider that has launched an index tracked by an index fund approved by the Securities and Futures Commission.
According to @tier10k statistics, currently, among the indices launched by five mainstream traditional institutions, Bitcoin BTC and Ethereum ETH are recorded in all indices; ranking second is Litecoin LTC and Polkadot DOT, with four indexes included; ranking The third place is Bitcoin Cash (BCH) and SOL, which are included in three indices; the fourth place is Cardano Avalanche Polygon and Chainlink, which are included in two indices. In addition, EOS BNB ATOM FIL ETC XLM UNI, etc. are also counted once. However, it should be noted that major indexes will also increase or decrease as the market changes.
William believes that, subject to meeting the requirements of the Securities Regulatory Commission, there are currently 13 crypto-assets that can be used as alternative information for retail transactions, namely: BTC, ETH, ADA, SOL, MATIC, DOT, LTC, AVAX, UNI, LINK , AAVE, BCH and CRV. Of course, the above-mentioned currencies may not necessarily be allowed to provide transactions to retail investors. Because assets that can be traded by retail investors need to meet the three conditions of "exchange due diligence review + qualified large-scale virtual assets + written approval from the China Securities Regulatory Commission", for example, the current operating conditions of SOL and BCH are not very optimistic and may be excluded by the China Securities Regulatory Commission. .
Currently Hashkey only provides 5 assets and 7 trading pairs, including BTC ETH USDT USDC and USD; OSL only provides BTC and ETH.
2. Brokers and banks allow ordinary citizens to buy coins
On June 26, HSBC, Hong Kong’s largest bank, allowed its customers to buy and sell virtual asset ETFs listed on the Hong Kong Exchange. It was also the first bank in Hong Kong to allow customers to buy and sell virtual asset ETFs listed on the Hong Kong Exchange. The move will expand exposure to cryptocurrencies to local users in Hong Kong. Cryptocurrency ETFs currently listed in Hong Kong include CSOP Bitcoin Futures ETF, CSOP Ethereum Futures ETF, and Samsung Bitcoin Futures Active ETF.
Hu Zhenbang, CFO of BC Technology, the parent company of OSL, a Hong Kong compliance exchange, said that last year the China Securities Regulatory Commission and the Monetary Authority issued very clear guidelines. If banks and securities firms want to provide digital asset services to customers, they must cooperate with digital asset licensed institutions. . There are two ways to cooperate. One is to directly introduce customers, and the other is to apply to the China Securities Regulatory Commission on the basis of the original stock and bond services and add digital asset services to the business scope by cooperating with licensed digital asset service providers. Brokerages can open accounts on licensed digital asset trading platforms to buy and sell digital assets for their end customers. Of course, banks can also develop their own trading systems and then apply for a license, but after all, digital assets are not the main product of banking business, so a more efficient way should be to cooperate with an external licensed digital asset platform.
3. The third, fourth and subsequent Hong Kong licenses
The Hong Kong government began to implement the virtual asset service provider licensing system (VASP licensing system) after June 1. Before that, the "No. 1 and No. 7 license" systems were implemented, that is, Category 1 (securities trading) and Type 7 (provision of automated trading services) regulated activity licenses. Currently, only the above-mentioned Hashkey and OSL have obtained the above two licenses.
The main differences between the VASP licensing system and the previous system are the addition of open retail transactions, mandatory licensing (previously it was only for professional investors and voluntary licensing) and increased investor protection, but at the same time the industry has set more thresholds In order to achieve the goal of selecting high-quality crypto exchanges, for example, it is necessary to establish a physical office in Hong Kong, at least two ROs (heads of licensed crypto institutions) with many years of management experience in traditional financial institutions and many years of virtual currency trading experience, and in 6 If you have a certain number of cryptocurrency users and trading volume before March 1st, you need to obtain a TCSP license as well as No. 1 and No. 7 licenses. You need to officially operate for one year and obtain regulatory approval before you can obtain a formal license.
At present, at least 10 institutions have announced their application for Hong Kong VASP licenses, including crypto institutions such as HashKey, OKX, Huobi, BitgetX, BitMart, Bybit, BitMEX, and Gate, as well as traditional institutions such as Ruyibo Finance.
Hu Zhenbang believes that the number of exchanges that will eventually obtain licenses will not be too many, estimated to be four to five. Because it also requires sufficient capital, provision of custody services, ensuring the maintenance and stability of the trading system, investment in network security, compliance requirements close to traditional finance, and back-end support, etc. For companies that do not operate compliance businesses themselves, it is not easy to meet these requirements.
4. Opening up the regulatory framework for RWA
Wu said that she had exclusively learned on July 6 that Elizabeth Wong, head of the SFC Financial Technology Group of the Hong Kong Securities and Futures Commission, said in an interview with Eliptic that the SFC will soon launch an update to change the view on STO 4 years ago (2019). Securities Token or RWA will not be defined as complex products and will have the opportunity to be opened to retail investors. RWA will be supervised based on the underlying assets. Analysts pointed out that this may promote a new round of RWA craze.
5. Stablecoin regulatory framework
Hong Kong's regulatory framework for stablecoins can be traced back to the first policy address of Hong Kong Chief Executive Li Jiachao in October 2022. At that time, he stated that the Hong Kong Monetary Authority was studying the market's opinions on the supervision of stablecoins and would ensure that the regulatory system is in line with international standards. Regulatory recommendations are consistent and appropriate to local circumstances
On January 31, 2023, the Hong Kong Monetary Authority released a consultation summary on the discussion paper on crypto-assets and stablecoins, recommending that a number of activities related to stablecoins be included in supervision, and setting out the expected regulatory scope and main regulatory requirements in the summary document . At the same time, Binance, Deloitte, Alipay, Animnoca, Circle (issuer of USDC), HSBC, Mastercard, Xinhuo Technology, WeChat, etc. have all provided suggestions for the participation of the Hong Kong Monetary Authority's "Cryptocurrency and Stablecoin Discussion Paper".
On March 20, Hong Kong Secretary for Financial Services and the Treasury Hui Ching-yu stated in a speech that the Hong Kong Monetary Authority is studying the regulatory system for "stable currencies" and aims to implement relevant supervision in 2024. On April 29, the Hong Kong Monetary Authority released its 2022 annual report, emphasizing that the first objects of regulation will be those stablecoins that claim to be linked to the value of one or more legal currencies; more detailed regulatory requirements will be formulated in 2023, and will be considered during the process A number of factors, including the latest market developments, recommendations and good practices from international bodies on the regulation of stablecoins, and responses to the discussion paper on cryptoassets and stablecoins. On May 9, Hong Kong Monetary Authority President Eddie Yue stated that in addition to the licensing of virtual asset platforms, a compulsory licensing system for stablecoins will be launched from 2023 to 2024.
On May 23, the Hong Kong Securities and Futures Commission stated its opinion on requiring non-security tokens to have a track record of at least 12 months. Regulatory arrangements for stablecoins are expected to be implemented in 2023/24. Before stablecoins are regulated in Hong Kong, we believe that stablecoins should not be included for retail trading. On June 12, Hong Kong Deputy Secretary for Financial Services and the Treasury Chan Ho-Lin stated that the Hong Kong Monetary Authority has conducted public consultations on the launch of stable coins and will gradually establish a regulatory framework in the future, with the goal of launching it before the end of next year.
In addition, Hu Zhenbang, Vice President of Hong Kong University of Science and Technology Wang Yang, Hong Kong Blockchain Association co-chairman Fang Hongjin and others also expressed different views on whether Hong Kong dollar stable currency or US dollar stable currency. Hu Zhenbang believes that the possibility of the emergence of Hong Kong dollar stablecoins is not too great; however, the international demand for U.S. dollar stablecoins is very large. If an issuer chooses Hong Kong as the place of issuance and accepts the supervision of the Hong Kong Securities Regulatory Commission, it is possible. Wang Yang and Cai Wensheng called on the Hong Kong government to issue a Hong Kong dollar stable currency backed by Hong Kong’s foreign exchange reserves; they believed that a powerful HKDG could challenge the hegemony of the US dollar in this ecosystem, thereby essentially achieving de-dollarization; under proper supervision, it could also be used as a An international strategy that reshapes the Hong Kong dollar’s role in channeling stablecoins to other countries. Fang Hongjin criticized Wang Yang and Cai Wensheng’s article, saying that the Hong Kong dollar stable currency should be endorsed and regulated by the government, which is a fundamental misunderstanding of the role of the government in the market economy; the issuance of the Hong Kong dollar stable currency is meaningful, but it should not be regulated by the Hong Kong government. It is issued by private institutions under the supervision of the Hong Kong government; using Hong Kong dollar stable currency to promote "de-dollarization", given that the Hong Kong dollar and the US dollar are linked exchange rates and can be freely interchanged in Hong Kong, de-dollarization is impossible of.