Faced with the repressive attacks by US regulators on cryptocurrency exchange platforms, Hong Kong has officially invited Coinbase to set up shop on its territory. Should we expect an exodus of major US crypto exchanges to Hong Kong
Hong Kong is making eyes at US exchanges
This has been the hot topic in the cryptocurrency ecosystem for the past week. The SEC, the US stock market regulator, is leading a repressive attack on the main players in the crypto industry. The first to bear the brunt are the two main exchanges, Binance and Coinbase, accused of securities fraud.
In addition to the economic and political issues raised by this regulatory battle orchestrated by the SEC, the supremacy of the United States over the crypto industry is at stake. Against the backdrop of a regulatory race led by Europe through MiCA and abandoned by the United States, an outsider is beginning to come into its own: Hong Kong.
Against this backdrop, Coinbase has been invited by Hong Kong to set up in its territory in order to benefit from clear, defined and deliberately flexible legislation. More specifically, this proposal was put forward by Johnny Ng Kit-chong, an active politician and member of the Legislative Council of the Chinese administrative region:
I hereby offer an invitation to welcome all global virtual asset trading operators including @coinbase to come to HK for application of official trading platforms and further development plans. Please feel free to approach me and I am happy to provide any assistance. pic.twitter.com/bcIi1IjMlc
– Johnny Ng 吴杰庄 (@Johnny_nkc) June 10, 2023
For those who don’t speak English, understand: “I hereby invite all global digital asset exchange operators, including Coinbase, to come to Hong Kong to register as official exchange platforms and pursue their development plans.”
As we mentioned last week on TCN, it is highly likely that these attacks by the US regulator will lead to an exodus of the country’s major players to jurisdictions with clearer and more defined regulations. Back in April, during the SEC’s first offensive, Coinbase had already threatened to flee the US for Europe or the UK. The issue has now been raised again, with Hong Kong entering the fray
Hong Kong, future global crypto hub?
Since October 2022, Hong Kong – and by extension, China – has made a completely unexpected change of course to open up once again to the cryptocurrency sector. As a reminder, China had decided to turn its back on cryptocurrencies in 2017. Despite its independent status, Hong Kong had to comply with Chinese regulations.
Now, Hong Kong’s ambition is to catch up and reclaim its status as a global economic and cryptocurrency hub. In just a few months, the autonomous region has made great strides: construction of a regulatory framework and a specific licence to attract exchange platforms, no taxation on cryptocurrency trading, etc.
Several cryptocurrency companies (including Huobi, Gate Group, Amber Group, OKX and BitMEX) have already expressed their intention to apply for a licence in Hong Kong. Nevertheless, the momentum does not seem very optimistic and only 10 companies have actually converted their licences to offer cryptocurrencies to Hong Kong customers.
This is certainly the reason why Hong Kong is stepping up a gear and directly challenging the major players in the cryptocurrency industry. It’s a strategy that could give some people pause for thought, especially if the US regulator’s crackdown continues.