Crypto Exchanges Say Hong Kong’s Ban on Retail Crypto Trading Could Be Counterproductive
Some major cryptocurrency exchanges have expressed concern regarding Hong Kong’s proposal to ban retail investors in the city from participating in crypto activities, stating that it could have an adverse effect.
Hong Kong’s Proposed Ban Could Affect 93% of Its Population
According to the South China Morning Post on Monday (Feb. 15, 2021), the Global Digital Finance, a body representing crypto exchanges such as Huobi, BitMEX, and Coinbase, and OKCoin, warned that Hong Kong’s proposal could drive retail investors to seek unregulated platforms.
Back in November 2020, Hong Kong’s Financial Services and the Treasury Bureau published a consultation paper that included a proposal to ban retail investors from trading cryptocurrency. The proposal, according to Hong Kong, would bring its domestic rules on Anti-Money Laundering and counterterrorism financing in line with recommendations from the Financial Action Task Force (FATF).
Meanwhile, crypto exchanges operating in Hong Kong are allowed to serve professional investors, who hold a minimum of HK$8 million ($1 million). The agency further consulted with the public and industry bodies, which closed in January 2021. The Hong Kong government is also looking to introduce the proposal as a bill to the legislative council later in 2021.
However, the chairman of Global Digital Finance’s advisory council, Malcolm Wright, argued that limiting crypto trading to professional investors did not apply to the U.K., Singapore, and the U.S., who are all members of the FATF. Wright added that if the bill is passed, retail traders would use overseas crypto exchanges for trading activities, or may turn to unregulated platforms.
Furthermore, a survey conducted by Citibank revealed that seven percent of Hong Kong’s population had net assets with a minimum of HK$10 million (US$1.3 million) as at mid-2020. Using Citibank’s survey, about 93 percent of Hong Kong’s population would be affected by the proposed ban, according to an estimate by South China Morning Post.
Following the introduction of the proposal, the digital trading company OSL became the first platform to receive a license from Hong Kong’s Security and Futures Commission (SFC).
Bitcoin Association Seeks Justification for Ban on Retail Crypto Trading
Apart from Global Digital Finance, the Bitcoin Association of Hong Kong have also kicked against the ban on retail crypto trading. The Association, which was involved in a bitcoin ad back in September 2020, stated that the government needed to provide a concrete reason why it would restrict retail investors from trading crypto. According to the body:
“Any barrier put in place to restrict the sale or purchase of bitcoin needs to be reasonable and well justified. Individuals … need to be able to use and accept bitcoin as payment.”
Bryan Cheung, the association’s president earlier commented on the proposal, stating that it would only drive companies out of the city. Cheung added that an awareness and education would have been a better alternative.