Hong Kong Regulators Have Revealed Plans To Bar Retail Investors From Trading Crypto

May 25, 2021 03:20 PM
Crypto Story of the Day

Crypto Story of the Day




The Top 10 was marginally lower-to-unchanged this morning as chaotic trading subsides for the moment. BTC spot volumes are below the 30-day averages while ETH volumes are above.

Crypto Story of the Day

During a Friday meeting of China’s State Council, discussions were held about “[cracking] down on [BTC] mining and trading behavior.” The same day, Hong Kong regulators revealed plans to bar retail investors from trading crypto.

The meeting of the State Council, described as the most senior administrative authority in the country, was held in order to discuss broader financial sector goals. A readout from the meeting places restricting BTC mining and trading under the general aim of managing financial risk. The meeting was chaired by Vice Premier Liu He, described as President Xi Jinping’s “right-hand man on the economy” by the WSJ.

Also on Friday, Hong Kong’s Financial Services and the Treasury Bureau (FSTB) revealed a proposed rule that would “[confine] the services of a [crypto] exchange to professional investors.” The restrictions were described as “appropriate at least for the initial stage” of a new crypto exchange licensing regime being implemented in the territory. 

These developments come after 3 Chinese self-regulatory organizations issued a joint statement last week which reiterated limitations on providing services to or engaging with crypto-related businesses. The notice was issued as a continuation of previous policies from the People’s Bank of China (PBOC), according to the statement. 

Last week the Financial Times also reported that a telephone hotline had been set up to “report suspected [crypto] mining outfits” in the northern Chinese region of Inner Mongolia. In March, the region’s government published plans to “clear out and shut down all virtual currency mining projects by the end of April 2021” in order to meet energy efficiency goals. 

Yesterday, crypto exchange Huobi, initially founded in China, announced that it was suspending BTC mining hosting services in the country. However, the firm’s mining pool, Huobi.pool, has continued normal operations. 

Chinese authorities have in the past announced efforts aimed at limiting the accessibility of BTC and crypto in the country. For example, in 2013, Chinese authorities ordered local banks to cease all services to BTC- and crypto-related businesses.

When the 3 Chinese self-regulatory organizations issued a joint statement reaffirming previously-imposed limitations on crypto in the country, we wrote that China’s stance towards the sector remains unchanged. It remains unclear if the comments from the State Council meeting are meant to suppress the space's growth by introducing uncertainty, essentially prolonging the status quo, or are sincerely meant to foreshadow a crackdown. 

However, potential restrictions to broad access to crypto in Hong Kong represent a subtle but significant change. Hong Kong has hosted some of the most significant crypto businesses, i.e. BitMEX, Bitfinex, and Tether. Narrowing the territory’s approach to crypto regulation to that of the mainland shouldn’t be overlooked as a major effort to limit the growth of crypto in China. 

While viewpoints may seem reiterated and remain unchanged, the more significant changes to the crypto landscape would come from a broader insulation of Hong Kong.

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