Clear and flexible regulation is needed for the development of virtual assets EJINSIGHT

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At the upcoming Hong Kong FinTech Week, the highlight is the government’s position and policy statement for the development of virtual assets in Hong Kong, which is expected to dispel regulatory uncertainty.

Many countries have gradually embraced this emerging trend with a cautious attitude. One of them is Singapore whose head of the Monetary Authority of Singapore (MAS) has explicitly explained the authority’s desire to become a crypto asset hub. MAS said it welcomes innovation in digital assets although licensing is required for service providers, and at the same time “strongly discourages and seeks to restrict” speculation in cryptocurrencies. currencies. With authority clearly establishing the bottom line, it is easier for companies to decide whether or not to act.

Cryptocurrency has become a mega trend. A World Bank blog in April this year pointed out that the total volume of on-chain cryptoassets over the past two years reached a total of US$2.8 trillion in the first half of 2021 alone. Compared to Bitcoin (40%), the share of Ether (24%) and Stablecoin (24%) is gradually increasing, with the geographical distribution of crypto-asset activity being global. The article concludes that crypto-assets and the underlying technology (such as blockchain) hold promise for financial innovation, inclusion, efficiency and transparency, although they may also present risks for global financial stability.

On the other hand, although the mainland announced a ban on cryptocurrency trading last year, China has returned to the top 10 of the Global Crypto Adoption Index 2022 published by a financial data analysis company Chainalysis in September, showing that there is still a lot of activity.

As for Hong Kong, the dilemma facing the local government is whether to incline towards the spirit of “one country” or that of “two systems”, as an article by the Hong Kong Economic Journal pointed out. .

Crypto assets are increasingly connected to the traditional financial system these days, the former CEO of Citigroup believed that all major financial institutions would consider trading cryptos “in one to three years”; Bloomberg reported that JPMorgan Chase, Bank of America and other investment banks were hiring these talents, reflecting the accelerated adoption of crypto assets by institutional investors. Goldman Sachs has also started offering cryptocurrency futures.

In addition, many ASEAN countries with close trade relations with Hong Kong have rapidly developed the Internet and virtual currency in recent years. The World Economic Forum says ASEAN is the fastest growing Internet market in the world, with 125,000 new users every day. ASEAN’s digital economy is expected to contribute $1 trillion to the region’s GDP over the next 10 years. According to the Global Crypto Adoption Index 2022, among 154 countries, four ASEAN countries rank in the top 20, including Vietnam (1st), Philippines (2nd), Thailand (8th) and Indonesia (20th). ). Therefore, to seize the huge ASEAN market opportunity in Fintech and smart city services, it is essential for Hong Kong to develop virtual assets.

Also, to help attract local and foreign companies to carry out related activities here, we need clear and flexible regulations. Moreover, when the mainland cannot fully regulate cryptocurrencies in the short term, Hong Kong can take the initiative to serve as a model for other cities in the Greater Bay Area. It also promotes the creation of new jobs and new types of work. Therefore, the authorities should prepare as soon as possible to attract and train these talents.

— Contact us at [email protected]

Dr Winnie Tang

Adjunct Professor, Department of Computer Science, Faculty of Engineering; Department of Geography, Faculty of Social Sciences; and Faculty of Architecture, University of Hong Kong

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