Hong Kong will open cryptocurrency retailing. How the market will react
Hong Kong will open cryptocurrency retail on June 1
Experts talked about the impact of news from Asia on the digital asset industry and how the rates of leading cryptocurrencies will behave amid the establishment of a new crypto hub
As of June 1, retail investors in Hong Kong will be able to trade cryptocurrencies on licensed platforms. On May 23, Hong Kong's Securities and Futures Commission (SFC) published a report on regulatory requirements for cryptocurrency trading platforms, with rules to take effect in early summer.
The regulator collected comments from market participants before publishing the document. It received 152 responses, including from Binance, Coinbase, Huobi, OKX, Kaiko, Matrixport, Ripple Labs, PricewaterhouseCoopers, and many others. The rules were developed in response to comments received. Any of the licensed trading platforms that comply with them will be able to officially provide services in the region.
According to the document, regulatory mechanisms for stablecoins are not scheduled to be implemented until 2024 when these assets are allowed by the commission in the retail industry. And tokens available to retail investors must meet certain criteria. Cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Bitcoin Cash (BCH), Polkadot (DOT), Solana (SOL), Cardano (ADA), Avalanche (AVAX), Polygon (MATIC) and Chainlink (LINK) meet this criterion, notes crypto-journalist Colin Wu.
Under the new rules, exchanges' advertising of specific cryptocurrencies, as well as products offering yield, stacking, and lending, fall under the ban.
The platform operator is required to keep 98% of customer assets in a cold wallet, with rare instances that would require separate authorization from the SFC.
"Strict rules are better than no rules."
The adoption of comfortable cryptocurrency legislation in Hong Kong will definitely be perceived positively by the market, said cryptocurrency market analyst Viktor Pershikov. According to him, the past few months have been marred by pressure on the industry in the United States, due to which many companies had to leave the region.
The expert also noted that the prospects for cryptocurrency legislation in the EU are still unclear. According to him, the recently adopted MiCA rules are not as transparent and do not fully reflect all the pitfalls that industry participants may face if they bet on the European Union.
The news from Hong Kong is certainly positive for the entire cryptocurrency community, Nikita Zuborev, senior analyst at BestChange.ru, agreed with the previous expert. According to the expert, even strict rules are better than no rules - it allows large serious players to plan their activities with an understanding of all possible risks.
"Players from Mainland China."
Over the next few years, China will have an opportunity to regain some of the markets lost after the ban on mining and cryptocurrencies, Zuborev believes. Access to digital assets through Hong Kong will increase capital allocation and provide legal entry to the market for serious investors from one of the world's largest economic centers.
Hong Kong's goal is to become a major player in a region where the adoption of cryptocurrencies in countries such as Malaysia, Vietnam, Singapore, and many others is outpacing the rest of the world, Pershikov says. He also doesn't rule out players from mainland China taking advantage of the jurisdiction, and this will cause a new surge in investment and capitalization growth in an industry that has suffered for several years from a lack of Chinese investors who are not allowed to handle cryptocurrency.
"Long-term positive effect."
The emergence of a new region with adequate crypto regulation that will allow new entrants into the industry could be a positive factor for the cryptocurrency market in the second half of the year, Pershikov said.
Particular attention, according to the analyst, could be paid to cryptocurrency exchange tokens, especially local ones such as OKX, as they will be among the projects that will benefit from licenses and the influx of new users.
At the same time, as Zuborev noted, the ban on stacking, seeding, pharming, and other schemes for making money from cryptocurrencies may complicate their work in the jurisdiction of Hong Kong.
The news itself has more of a long-term positive effect, the expert said. But at the moment the market will not almost react to the new rules, a short-term increase in volatility within the standard market fluctuations of 5-10% is possible, the analyst specified.
He also noted that large, serious projects with good reputations like Bitcoin, Ethereum, Tron, and the like could potentially benefit from updated approaches.
Bitcoin and Ethereum, as market leaders in terms of capitalization, will indirectly benefit from demand, which will lead to higher prices, Pershikov said. By the end of the year, according to his estimates, the exchange rate of VTC may rise to $45,000 and the price of Ethereum to $3,000.
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