Crypto News- Hong Kong vs. Dubai: How Different Cities Are Shaping the Future of Crypto
Crypto News- Hong Kong-based First Digital Trust is advocating for accelerated regulation of the digital assets sector in the city. Currently, Hong Kong is striving to establish itself as a global hub for cryptocurrency. However, the city has only granted full licenses to two virtual asset trading platforms: Hash Blockchain and OSL Digital Securities. Many other crypto exchanges are still awaiting full operational licenses.
Current Regulatory Landscape
Vincent Chok, CEO of First Digital, highlighted that Hong Kong’s conservative and slower regulatory approach is understandable, given its emphasis on investor protection. Despite this, Chok expressed hope for quicker regulatory advancements to keep pace with the industry’s rapid development. As of June 1, operating an unlicensed virtual asset trading platform in Hong Kong has become a criminal offense. The Securities and Futures Commission (SFC) has also published an alert list identifying suspicious or unlicensed virtual asset trading platforms potentially targeting Hong Kong investors.
Comparison with Dubai’s Regulatory Approach
Hong Kong’s regulatory approach is being closely watched in comparison to Dubai’s advancements in the stablecoin sector. On July 17, the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) released their findings on local stablecoin regulation. Just a week later, Jingdong Coinlink Technology Hong Kong Limited, a subsidiary of JD Technology Group, announced plans to issue a stablecoin pegged to the Hong Kong dollar (HKD). The HKMA recognizes this initiative as part of its sandbox program.
In contrast, Dubai has made significant strides in the stablecoin sector. On August 21, Tether, a leading stablecoin provider, announced plans to launch a new stablecoin pegged to the UAE dirham (AED) in collaboration with UAE-based Phoenix Group and Green Acorn Investments. Additionally, a new dirham-backed stablecoin, DRAM, was introduced in October 2023 and is listed on decentralized finance platforms such as Uniswap and PancakeSwap.
Banks and Crypto Custody Services
Chok does not anticipate banks rushing to offer digital asset custody services in the near future. He notes that the additional liabilities associated with crypto custody exceed the risk appetite of many banks. However, companies with established trust structures are stepping in to provide these services. Recently, the United Arab Emirates permitted Standard Chartered to start offering crypto custody services, beginning with Bitcoin (BTC) and Ether (ETH). This service is being launched in partnership with Brevan Howard Digital, the cryptocurrency division of the hedge fund Brevan Howard.
Hong Kong’s Innovations in Web3 and Digital Assets
Despite the slow licensing regime for digital asset trading services, Hong Kong is making significant progress in other areas of Web3 technology. These include applications in central bank digital currencies (CBDCs) and the tokenization of real-world assets. Notably, BTC and ETH exchange-traded funds in Hong Kong offer a unique in-kind subscription mechanism, allowing direct subscription and redemption using BTC and ETH. This innovative structure simplifies the investment process for investors.
Hong Kong’s Trust and Company Service Provider licensing also supports trust structures holding digital assets, offering a unique and favorable feature compared to other jurisdictions. This robust regulatory framework not only facilitates custody services but also supports sophisticated services like legacy management.
Project Ensemble: Pioneering Tokenization and Interbank Settlements
Initiatives such as the HKMA’s Project Ensemble are paving the way for the tokenization of real-world assets and interbank settlements using tokenized money. Launched on August 28, Project Ensemble explores the technical interoperability of tokenized assets, tokenized deposits, and a wholesale central bank digital currency (wCBDC). The project builds on previous initiatives, including trials of tokenized deposit settlements with HSBC and the HKMA’s pilot e-HKD CBDC for transactions between HSBC and Hang Seng Bank.
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