Government officials confirmed the city’s crypto commitments at the Hong Kong Web3 Festival this week as it aims to become a fully regulated crypto hub attracting investment and Web3 startups.

On April 12, the financial secretary, Paul Chan Mo-po, reiterated that proper regulation and supervision were of paramount importance.

“I think everyone has learned from recent events that proper regulations are imperative to creating a sustainable development environment and a more ideal space for development.”

Hong Kong to regulate DeFi

The Hong Kong Securities and Futures Commission (SFC) also reportedly wants to regulate decentralized finance. The agency believes that DeFi platforms will need a license, which essentially means that they will not be DeFi.

Keith Choy, head of the SFC’s brokerage division, said that DeFi should be considered the same as CeFi (central or traditional funding).

“As such, as long as DeFi activity remains within the scope of securities and futures, it would be subject to the same regulatory requirements applicable to traditional financial activity.”

Lily King, COO of crypto asset custodian Cobo, commented that “if Hong Kong really intends to regulate DeFi, this will mean it has a stricter policy.” [environment] than Singapore.”

New regulations coming into effect in June will require all crypto exchanges in Hong Kong to have a license from the SFC. However, the licensing process is very strict, with strict requirements for which tokens they can list.

However, regional banks are opening up to cryptocurrencies, which cannot be said of the West. Earlier this week, Hong Kong’s largest online bank announced that it will offer transfers and conversions to and from cryptocurrencies and fiat currencies.

ZA Bank will act as a settlement bank for clients, allowing withdrawals in Hong Kong, Chinese and US currencies from crypto deposits with exchanges, CEO Ronald Iu said.

Not for Chinese retailers

However, the Hong Kong crypto market will not be available to mainland Chinese retail traders due to regime restrictions there.

It will provide a path for Chinese banks, institutions and corporations to legally enter crypto markets.

Currently, there are only two fully licensed crypto exchanges in Hong Kong: HashKey and OSL.

OKX Chairman Hong Fang was optimistic, saying, “It’s a very fluid situation, but I can see Hong Kong as a very important hub for our team, along with the US and a few other offices.”

OKX announced plans to expand its presence in Hong Kong by applying for virtual asset licenses at the end of March.

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