Crypto industry actors in Hong Kong have been trying to push back against a forthcoming law that would restrict legal cryptocurrency trading to professional investors, locking out 93% of the local population from the market.
In comments to the South China Morning Post published on Monday, industry body Global Digital Finance warned that the proposed law would likely push retail traders to embrace unregulated platforms. Global Digital Finance represents cryptocurrency exchanges such as BitMEX, Huobi, Coinbase and OKCoin and has been at the forefront of industry efforts to push back against the forthcoming legislation.
Hong Kong's Financial Services and the Treasury Bureau first published the proposal in November 2020 as part of a bid to toughen Anti-Money Laundering and Counter-Terrorist Financing measures. The move aligns with efforts to bring domestic regulations in line with recommendations from the Financial Action Task Force, or FATF.
Yet the bureau's proposal exceeds the requirements of the FATF's framework, echoing instead the tough stance toward cryptocurrency trading in mainland China. The chair of Global Digital Finance's advisory council, Malcolm Wright, has pointed out that FATF members Singapore, the United Kingdom and the United States all continue to allow retail traders to take part in the cryptocurrency market.
Throughout January, the government consulted with both members of the public and industry bodies. Now that the consultation period has come to a close, the proposal is expected to be turned into a bill and introduced to Hong Kong's legislative council later in the year. The South China Morning Post's estimate that 93% of the domestic population would be affected by the ban is based on a recent CitiBank survey that found that roughly 7% of the population, or 504,000 individuals, had enough assets to meet the threshold for professional investors.
A representative from the Bitcoin Association of Hong Kong recently argued that “to restrict retail individuals from accessing Bitcoin would be overshooting the government’s goals of promoting innovation, and financial inclusion.” The proposed restrictions could also extend to Bitcoin (BTC) ATMs and will significantly expand the remit of Hong Kong's existing crypto licensing rules for businesses.
Speaking to Cointelegraph, the Bitcoin Association's co-founder, Leonhard Weese, summarized the organization's stance:
"Already in the status quo it is very difficult for Hong Kongers to find a legitimate platform, and buying Bitcoin often requires carrying cash. There is no reason why Hong Kong should not have access to platforms of the likes of Coinbase or Cash App, which other FATF members consider safe and in compliance with anti-money laundering regulation."