HK Crypto Firms Have Begun Contingency Plans To Relocate
HONG KONG – Major cryptocurrency firms in the city are considering to relocate to other countries with friendlier regulatory rules on the sector, such as Singapore, due to the China’s crackdown on the cryptocurrency industry and potentially tougher rules in Hong Kong, reported the Financial Times (FT) on Thursday morning (18 August, SGT).
“Every large crypto company in Hong Kong has already started a contingency plan to relocate their business due to the uncertainty,” revealed Henri Arslanian, Crypto Leader at consulting group PricewaterhouseCoopers (PwC) and former chair of Hong Kong’s FinTech Association.
Hong Kong risks becoming “like an academy football club that trains these companies before they go to other jurisdictions which will reap the rewards”, he said.
Notably, the Chinese territory has played a key role in the short history of cryptocurrencies. For instance, it’s the birthplace of some of the biggest crypto firms in the world as well as some of the sector’s most ground-breaking inventions, with trillions of US dollars changing hands via its homegrown crypto exchanges.
The world’s biggest stablecoin, Tether (USDT), was introduced in Hong Kong. Crypto companies like FTX Trading and blockchain start-up Block.one have quickly grown from their Hong Kong homes, supported by the same investors that backed PayPal and Facebook. FTX Trading is valued at US$18 billion, while Block.one raised US$10 billion earlier this year.
These accomplishments were the fruit of Hong Kong’s financial expertise and entrepreneurial spirit that also birthed billionaires from plum sauce makers and real estate speculators. In fact, many of the biggest crypto exchanges in the city were founded by those who resigned from successful careers at multinational banks there.
However, the city’s crypto scene has become a tense subject for the territory’s financial regulators. Its cryptocurrency sector has grown so huge that it has become increasingly at odds with Beijing’s cold stance on cryptocurrencies.
Consequently, Hong Kong’s crypto sector is facing an existential crisis, with looming regulations forcing companies to move elsewhere to markets with friendly regulations.
“For most large crypto groups, Singapore is unlikely to be a first choice, but the growing sense of unease in Hong Kong is adding to its allure. Its early wins appear to demonstrate the benefits of regulatory clarity; something that Hong Kong nervously awaits,” said FT’s Asia Financial Correspondent Tabby Kinder in an opinion piece.
The contingency plans to relocate elsewhere were initiated as HK government officials had proposed to enact the world’s strictest rules on the cryptocurrency industry. For instance, only professional investors who have US$1 million in liquid assets (excluding digital currencies) would be allowed to trade cryptocurrencies. Moreover, crypto exchanges would be required to obtain licenses similar to asset management houses that transact in securities.