Hong Kong tightens the screw on exchanges: China in the background?

Hong Kong regulators have announced that they will begin to monitor cryptocurrency exchanges more closely. And the trend seems to come straight from China …

End of recess for exchanges located in Hong Kong

Hong Kong had previously been an exception: the independent territory had decided to regulate obligatorily only exchange platforms offering securities and futures . Hong Kong’s Securities and Futures Commission (SFC) did an about-face, however, as Reuters reported earlier this week.

Hong Kong will now regulate all cryptocurrency trading platforms , regardless of the services offered. The territory is thus aligned with other regions of Asia: Japan and Singapore have similar regulatory frameworks.

SFC justifies its position

The difference is that a significant number of exchanges were directed to Hong Kong in order to take advantage of a more flexible regulatory framework. This will therefore be a game-changer for the companies concerned. As a reminder, Binance, OKEx and Huobi have offices in Hong Kong.

CFS President Ashley Alder explained that it was a matter of limiting the ways in which companies could escape control :

‚ C‘ is a significant limitation. The current regulatory framework allows a platform operator to operate outside the sight of regulators, simply ensuring that the crypto assets traded do not meet the legal definition of a financial security. ”

China at the origin of this about-face?

For some commentators, this change of course originates… From China. The country is indeed preparing to launch its central bank digital currency (MNBC), and therefore wishes to limit cryptocurrencies, which it considers to be competitors. In any case, this is the interpretation made by Adam Cochran of Cinneamhain Ventures, who published an analysis of the situation :

“ This sudden change appears to be stemming from growing pressure from Chinese influence on Hong Kong, as well as fears that cryptocurrencies will be used to move money out of China .”

We can not help but notice that Hong Kong’s change of course comes at a time when China has banned all stablecoins backed by the yuan . The country has also increased pressure on OTC traders , in particular by monitoring phones and bank cards.

Whether the change is due to the upcoming release of the Chinese MNBC or not, Hong Kong has just lost its status as a haven for crypto companies. We will therefore see if this will lead to changes of location for the exchanges that are installed there.