According to a Hong Kong entrepreneur, although digital assets regulations are largely favorable, the banking regulations in place may impede the growth of the industry in the region; in addition, while Bitcoin experienced a surge following the filing of BlackRock’s iShares ETF, the rally was short-lived.
Bitcoin experiences a surge, followed by a decline.
Following the submission of paperwork by BlackRock iShares’ unit to the SEC on Thursday afternoon for the establishment of a spot Bitcoin ETF, Bitcoin, and other cryptocurrencies experienced a temporary surge late on the same day.
However, despite the rally regaining the ground that was lost the previous day, it failed to reach the $26,000 threshold that Bitcoin had lost almost a week prior. At present, the leading cryptocurrency is trading at $25,556, indicating an increase of almost 2% over the past 24 hours. Bitcoin experienced a decline on Wednesday due to concerns about the US central bank’s monetary policy overreach and the increasing regulatory scrutiny of cryptocurrencies in the US.
Ether experienced a similar spike, rising by 0.8% from Wednesday to trade above $1,660. Other significant cryptocurrencies that had been in negative territory for a significant portion of Thursday reversed course and turned green. SOL, the token of the Solana smart contracts platform, was recently up by 1.8%, while SAND and AXS also rose by more than a percentage point. However, MATIC, the native cryptocurrency of the Polygon blockchain, declined by over 4%. These digital assets were among the 19 mentioned in lawsuits filed by the US Securities and Exchange (SEC) that accused Binance and oinbase">Coinbase exchanges of violating securities laws.
Brian D. Evans, the CEO of BDE Ventures, a Web3 venture studio and advisory company, expressed concerns among investors regarding the unfavorable regulatory climate for cryptocurrencies in the US, in an email to CoinDesk.
According to Evans, there seems to be a significant shift underway, where project founders are seeking locations outside of the US to base their operations. He notes that the market feels considerably dislocated in this regard, with US-based investors struggling to navigate a regulatory system that has not been updated since the Great Depression.
Evans stated that this inadequacy has prompted projects to search for better-regulated jurisdictions such as Hong Kong, Dubai, and the UK.
Evans further remarked that a worldwide reshuffling is currently underway, which is expected to focus on the next wave of innovation and market growth in Asia and the Middle East. Therefore, he believes that the digital asset ecosystem is becoming more resilient, which will make the upcoming Bitcoin halving even more surprising to many observers. In summary, while bullishness is present, it is increasingly being driven by foreign events.
Is Hong Kong Ready to Become a Crypto Hub? The Banks May Not Be Prepared
The financial regulator in Hong Kong is instructing certain banks in the city, who are declining to onboard cryptocurrency clients, to accept their funds.
This is not the first instance where we have encountered difficulties faced by cryptocurrency firms in securing banking services in Hong Kong.
Several months ago, reports emerged that certain state-owned banks in China, whose Hong Kong branches operate under local regulations and possess significant autonomy, were seeking cryptocurrency business in the city.
There existed a singular issue with regard to the adoption of cryptocurrency. Despite the significant shift in attitude towards its acceptance, which was previously deemed implausible, prospective clients encountered considerable difficulty in the process of engagement.
According to Adrian Wang, the founder, and CEO of Metalpha, a digital assets wealth management firm based in Hong Kong, the regulatory framework for digital assets in the city is generally favorable and promotes collaboration between banks and cryptocurrency companies. However, banks presently maintain strict prerequisites that pose challenges for the growth and expansion of crypto businesses. Despite this, Wang remains hopeful that the banking industry will soon make significant strides towards embracing cryptocurrency.
Previously, Hong Kong was notorious for being a hub for organized crime’s money laundering activities, which led to HSBC being levied with substantial fines. This experience has transformed the bank into a more cautious and risk-averse entity. The company’s exposure to massive financial penalties has played a significant role in shaping its current business approach.
It is reasonable that banks are hesitant to engage with cryptocurrency. The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), which appear to have granted themselves an international mandate, have accused Binance of commingling $12 billion in funds and contravening securities laws. oinbase">Coinbase has also been subject to similar allegations.
Banks would be disinclined to have such clients.
Although Binance and oinbase">Coinbase are the prominent players that have been targeted first, it is uncertain which exchange may be subjected to similar scrutiny in the future. Even if a Hong Kong-based bank does not conduct business in the United States, it is still susceptible to being ensnared in the regulatory net if U.S. authorities pursue an exchange that is deemed legitimate in Hong Kong but offer products in USD.
Certainly, it is advisable to maintain a positive outlook. However, it appears that Hong Kong has a considerable distance to traverse before it can be regarded as a significant center for cryptocurrency.
