HKSAR Suggests Regulatory Regime to Avoid Virtual Assets Market Meltdown
In response to the recent crash in the crypto market, the Financial Deputy Secretary of Hong Kong has published a blog suggesting a regulatory regime would effectively avoid crypto exchange crash scenario amid the so-called “crypto winter”.
Emphasizing transparency, the blog mentioned the use of regulations and how they can help monitor the development of the virtual assets industry in Hong Kong. The article reads, “While actively embracing innovation, there must be a regulatory package that adapts and keeps pace with the times to properly manage risks and create prerequisites for the orderly and vigorous development of the market.”
Though the Financial Secretary’s Office in the blog did not mention the recent collapse of the FTX exchange but seemed only to be highlighting valuable points and advice. Expressing how important it is to maintain safety and adequately manage risks, the Financial Secretary’s Office noted:
“We must make not only full use of the potential brought by innovative technologies, but also be careful to guard against fluctuations and potential risks that they may cause, and avoid these risks and impacts from being transmitted to the real economy.”
Furthermore, the administration advised virtual assets firms to maintain separate accounts to distinguish clients’ assets. They also recommended crypto businesses set aside actual operating expenses for at least 12 months, among other requirements.
To conclude, the Financial Secretary’s Office reflected on the economy, saying, “When considering the entire development direction, one of the core aspects is that if finance serves the real economy, technological innovation should also play a role in serving the real economy.”
Notably, this update comes not long after Hong Kong published its latest policy statement related to the outlook of virtual assets development, including the issuance of tokenized green bonds and the preparation of developing the digital Hong Kong Dollar.
Prior to that, Hong Kong made some critical moves that defined its aim to become an international virtual assets centre. The City’s top financial regulator, the Securities and Financial Commission (SFC), was reportedly set to permit the relisting of Bitcoin (BTC) and Ethereum (ETH) in exchanges that allow retail traders.
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