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Hong Kong’s HashKey Adopts New Travel Rule Integration: Report

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In a recent development, renowned crypto journalist Colin Wu, through Wu Blockchain X post, revealed that Hong Kong’s HashKey exchange has implemented significant changes in its operations to comply with the Travel Rule from the onset of this year. This move aligns with the regulatory requirements set for virtual asset service providers (VASPs) by the Hong Kong Travel Rule, which mirrors international standards stipulated by the Financial Action Task Force (FATF).

The integration of new regulations by HashKey comes amidst a series of legislative proposals demanding compliance from domestic exchanges in Hong Kong. The exchange has adjusted its deposit and withdrawal procedures, particularly regarding interactions with third-party exchanges. Originally planning to encompass 24 exchanges, HashKey limited the integration to Binance, as announced in the previous month.

HashKey’s Exclusive Partnership With Binance

Since its inception this year, HashKey has specifically facilitated the acceptance of deposits concerning virtual assets solely from Binance Global. Nonetheless, the platform explicitly stated that it would not promptly entertain deposits from exchanges other than Binance. Instead, HashKey intends to broaden its scope to encompass various exchanges progressively.

In line with the changes, withdrawal procedures have undergone modifications. While retaining the current whitelisting process, HashKey invalidated previously approved withdrawals to exchanges other than Binance. Crucially, previously whitelisted addresses on Binance remain valid without revalidation.

Stressing the paramount importance of compliance, HashKey Exchange has emphasized the critical need for third-party exchange deposit and withdrawal arrangements to align rigorously with the newly instituted regulations, effective January 1, 2024. The exchange focuses squarely on ensuring strict adherence to these updated standards within its operational framework.

As reported earlier, Hong Kong authorities are introducing new regulations for stablecoins, proposing a mandatory licensing system in collaboration with the Hong Kong Monetary Authority and the Financial Services and Treasury Bureau. This initiative aims to establish a comprehensive regulatory framework to oversee the burgeoning stablecoin market in the region.

Amidst the surge in crypto spot ETFs worldwide, Hong Kong prioritizes accessibility for retail investors while steadfastly upholding robust regulatory standards. The region’s approach focuses on facilitating easier entry into the crypto investment sphere without compromising on stringent compliance measures.

Hong Kong’s Proactive Regulation Of Stablecoins Signals Strategic Crypto Hub Ascent

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Hong Kong is taking steps to regulate the issuance and marketing of stablecoins, a form of digital currency that is pegged to a fiat currency. The Hong Kong Monetary Authority (HKMA) and the Financial Services and the Treasury Bureau (FSTB) published a consultation paper on the proposed regulatory framework for stablecoin issuers on December 27, 2023.

The move is part of the jurisdiction’s efforts to become a leading crypto hub in the region. The paper outlines the criteria and conditions for obtaining a license from the HKMA and the supervisory expectations and guidance on compliance for prospective issuers.

According to the paper, the licensing regime will apply to any entity that intends to issue a stablecoin that is referenced to a fiat currency or market such a stablecoin to the Hong Kong public. The regime will also cover any entity that intends to issue a stablecoin that is referenced to the Hong Kong dollar, regardless of whether it is marketed to the Hong Kong public or not.

The paper states that the licensing regime will be introduced through legislation and that the HKMA will be the stablecoin issuers’ sole regulator and supervisor. The paper also proposes a regulatory sandbox where eligible applicants can test their products and services in a controlled environment before applying for a license. The consultation period will last until February 29, 2024, and the HKMA and the FSTB invite public and industry feedback on the proposed framework.

Hong Kong’s Proactive Stablecoin Regulation

The proposed framework is a sign of Hong Kong’s proactive and forward-looking approach to regulating the crypto sector. It follows the implementation of a licensing regime for crypto service providers in June 2023, which recognizes retail crypto trading as a regulated activity.

Hong Kong aims to foster innovation and competition in crypto while ensuring consumer protection, financial stability, and anti-money laundering by introducing a licensing regime for stablecoin issuers. The framework also aligns with the international standards and best practices on stablecoin regulation, as the Financial Action Task Force (FATF) and the Financial Stability Board (FSB) recommended.

The framework may also give Hong Kong an edge over other jurisdictions, as it provides legal certainty and clarity on the regulatory requirements and expectations. However, the framework may also pose challenges and costs for existing and potential stablecoin issuers, as they must comply with the licensing conditions and the ongoing supervision by the HKMA.

Related Reading | South Korea To Reveal Crypto Assets Of Top Officials Next Year

Crypto Craze: 75% Of Hong Kong Investors Chase Quick Gains

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In the latest study conducted by the Department of Applied Social Sciences at the Hong Kong Polytechnic University, it has been revealed that a significant majority of crypto investors in Hong Kong are driven by the pursuit of short-term returns, belief in the trendiness of virtual assets, and a fear of missing out on investment opportunities.

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Inertial Thinking Patterns Among Hong Kong Crypto Investors

The study, commissioned by the Investment Committee and outlined in the “Retail Investor Research 2023,” sheds light on the behavior and attitudes of virtual asset investors in the region. The survey, which involved a diverse range of participants, found that 75% of respondents invest in cryptocurrencies to secure short-term returns. Meanwhile, 74% believe crypto-assets represent a current investment trend, and 73% express concerns about missing potential investment opportunities.

Despite the prevalence of these motivations, the study also indicates that most virtual asset investors possess good financial management knowledge. This seemingly paradoxical situation further explores the psychological and cognitive aspects that influence investment decisions.

The research delves into inertial thinking patterns among crypto investors, highlighting several common cognitive biases. The identified shortcuts include availability, where investors tend to rely on readily available, easy-to-recall, and familiar information; anchoring, involving an excessive emphasis on past information, such as initial offering prices; and overconfidence, where investors overestimate their abilities and blindly believe in their capacity to outperform the market.

The study categorizes these thinking shortcuts into five distinct types, each susceptible to cognitive biases. These types are labeled as the “Following the Trend Type,” the “Snake Bite Obedient Type,” the “Own Experience Type,” the “Intuition Expansion Type,” and the “Wishful Thinking Type.”

“The Retail Investor Research 2023” underscores the importance of understanding these cognitive biases to make informed investment decisions. While most virtual asset investors display good financial management knowledge, there is a call for continued improvement and review of financial management behaviors and attitudes.

Nevertheless, the insights from this study provide valuable information for investors, regulators, and industry stakeholders alike. It remains to be seen how these findings will impact decision-making and risk management strategies within the dynamic world of virtual asset investment in Hong Kong.

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Hong Kong Monetary Authority Prepares For Second Tokenized Green Bond Launch

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Hong Kong is poised to launch its second tokenized green bond in the coming months, with the Hong Kong Monetary Authority (HKMA) utilizing blockchain technology to improve efficiency and transparency in the redemption process, according to a report from Chinese newspaper Ming Pao. CEO Yu Weiman disclosed the plans in anticipation of “Green Finance Week” in February 2024.

This event aims to foster discussions on green financial transformation, including a global climate business forum in collaboration with the International Finance Corporation under the World Bank. 

Hong Kong’s Global Green Brand Takes Center Stage During Green Finance Week

Weiman highlighted the goal of bolstering Hong Kong’s global green brand during the Green Finance Week, with various financial institutions organizing green finance activities to enhance the city’s reputation in the field.

Yu Weiman underscored the symbiotic relationship between green finance and financial technology, particularly in the issuance of the second tokenized green bond. The HKMA is actively exploring blockchain-based redemption processes to improve operational efficiency. 

Additionally, the authority is investigating the integration of blockchain technology and the Internet of Things (IoT) for tokenized green bonds, allowing bondholders to gain comprehensive insights into their investments and reduce the risk of “greenwashing.”

Weiman also noted the substantial growth in Hong Kong’s green bonds and green loans, which surged to approximately US$80 billion from US$11 billion just two years ago. He expressed confidence in the continued momentum of green finance, emphasizing the potential for further expansion.

In June, Hong Kong implemented new regulations for the crypto industry, allowing retail investors to trade virtual assets. This marked a departure from previous restrictions limiting digital asset trading to professional investors and traders with at least $1 million in bankable assets. 

As part of these regulations, the Securities and Futures Commission (SFC) has granted licenses to crypto exchanges, with OSL and Hashkey Group becoming the first in the city to receive such licenses. These exchanges also offer crypto-to-fiat conversion services through ZA Bank, Hong Kong’s largest online-only bank.

Notably, the crypto exchange Hong Kong VAEXC (VAEX) has recently applied for a virtual asset trading platform license with the SFC. The JPEX scandal, considered one of the largest financial frauds in Hong Kong’s history, has spurred the government to expedite the approval process for cryptocurrency products, aiming to promote compliance in the industry.

Hong Kong’s Crypto Rising Star In Identity Mix-up

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VAEXC Limited, a Hong Kong-based cryptocurrency exchange, recently submitted an application for a compliance exchange license, as disclosed on the Hong Kong Securities and Futures Commission [SFC] website. Contrary to initial assumptions, VAEXC Limited is not affiliated with Binance, as it was mistakenly linked due to its name similarity with HKVAEX, which is considered a Binance HK entity. Blockchain technology analyst Colin Wu clarified that HKVAEX is in the preparation phase and has not submitted an application, urging the public not to confuse it with the announced VAEXC.

The SFC updated the list of virtual asset trading platform applicants on November 27th, revealing that Hong Kong VAEXC Limited officially submitted its application on November 25th. The exchange, known as VAEX, prioritizes security and regulatory compliance, positioning itself as a next-generation trusted virtual asset exchange. With a team boasting extensive industry expertise and leveraging KuCoin Tech, VAEX aims to provide a secure, reliable, stable, and user-friendly platform for crypto asset trading and management.

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Hong Kong's Crypto Rising Star In Identity Mix-up 3

In honor of VAEX’s launch, KuCoin is initiating a public testing campaign, offering a 15,000 USDT prize pool to eligible KuCoin users and participants. Meanwhile, the “crypto-friendly” destination was marred with recent scandals. On Nov. 25, Hounax, an unlicensed crypto exchange, reportedly duped 131 residents out of 120 million HKD [$15.4 million] through yet another alleged Ponzi scheme. Despite this, Hong Kong’s regulatory approach remains steadfast.

Hong Kong’s SFC: 1-Year Grace Period Remains In Force

Julia Leung, the CEO of Hong Kong’s Securities and Futures Commission, emphasized that the one-year grace period for digital asset exchanges operating in the special administrative region will persist. Leung explained that even if the grace period were to end, fraud could still occur, and therefore, there are no immediate plans to modify the grace period and associated measures.

Under regulations introduced in June, cryptocurrency exchanges in Hong Kong are required to apply for a virtual asset service provider [VASP] license from the SFC by June 2024 or face deregistration. Despite this, unregistered exchanges are allowed to operate during the interim transition period. The decision to maintain the grace period reflects a pragmatic approach, acknowledging the challenges of completely eradicating fraudulent activities in the cryptocurrency space and allowing exchanges time to comply with the regulatory framework.

Hong Kong Expedites Crypto Approvals Post-JPEX Rugpull, Focusing On Compliance Boost

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In the wake of the recent JPEX Rugpull incident, OSL, a compliance-focused exchange in Hong Kong, disclosed that the local government had expedited the approval process for cryptocurrency products. This move aims to boost the compliant development of the industry, signaling a proactive stance following the shockwaves caused by the JPEX debacle.

Stricter Monitoring for Crypto Platforms

According to reports from local media, the JPEX incident stirred considerable controversy, prompting licensed virtual asset platform operators to anticipate faster approval timelines for new products. Financial technology solution providers noted that building future tokenized platforms in collaboration with banks could significantly enhance the virtual asset industry’s credibility in the public’s eyes.

BC Technology (0863), a subsidiary of OSL and a licensed virtual asset platform company in Hong Kong, revealed insights on the matter. Hu Zhenbang, the group’s Chief Financial Officer, emphasized that the government has consistently supported the licensed virtual asset industry, maintaining stringent regulatory oversight. Post-JPEX, Zhenbang observed an acceleration in product approvals, indicating a commitment to reinforcing compliance.

He commented:

Non-compliant platforms will face stricter monitoring in the aftermath of the JPEX incident. To avoid legal repercussions, these platforms will no longer be permitted to engage in extensive public promotion at MTR stations, as was common in the past.

Chen Yaowen, Chief Digital Director and Financial Technology Innovation Director of Sifang Innovative Hong Kong, a financial technology solution provider specializing in virtual asset tokenization, expressed optimism. He highlighted the pivotal role that banks could play in fostering the industry’s growth, particularly by integrating with tokenized platforms.

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Source: News.mingpao

Yaowen clarified that with the public’s trust in banks and oversight from the China Securities Regulatory Commission, banks can ensure compliant operations in the crypto industry. It would enable the public to seamlessly trade virtual assets on regulated platforms, with secure withdrawals and deposits, presenting banks with substantial opportunities in tokenized virtual assets and secure custody wallets.

Nevertheless, the collaboration between compliant platforms, government regulators, and established financial institutions is anticipated to drive the region’s ascent in the global virtual asset market.

Related Reading | Weekly Crypto Report: Bitcoin & Ethereum Stand Firm, Altcoins Steal the Spotlight

Victory Securities Makes Crypto History with Retail Trading Approval In Hong Kong

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Victory Securities, a venerable Hong Kong-based securities company with a 50-year legacy, has been granted approval by the Hong Kong Securities and Futures Commission (SFC) to extend virtual asset trading and consulting services to retail investors. It marks the first instance in Hong Kong’s financial history where a traditional securities company has been authorized to open the doors of cryptocurrency trading to retail clients.

As revealed in the official press statement, Victory Securities has become the inaugural licensed corporation to provide crypto asset trading and advisory services to retail investors. This will not only signify a pivotal milestone for the company but also usher in fresh possibilities for the evolution of Hong Kong’s virtual asset trading ecosystem.

Mr. Chen Peiquan, Executive Director of Victory Securities, expressed his satisfaction, noting, “We are very pleased to be recognized by the China Securities Regulatory Commission again, making Victory once again the ‘first.'” He highlighted the company’s commitment to utilizing its extensive business experience to expand investor choices in compliant investments.

Crypto Investment Options: Discounts & Innovative Trading Solutions

Victory Securities aims to bridge the gap between traditional finance and virtual assets, providing customers with flexible and convenient asset allocation options. The company plans to offer general investors investment advice on virtual assets, along with the publication of relevant research reports. 

To bolster investor education, Victory Securities plans to enhance understanding of virtual assets, actively promote the popularization of virtual asset investment, and collaborate with regulatory agencies to establish Hong Kong as a stable, safe, and sustainable virtual asset trading center.

The company’s data reveals a significant uptick in virtual asset transactions and new customer registrations in the third quarter of this year, indicating a robust demand for virtual asset trading services. 

In response, Victory Securities plans to launch various discounts and introduce the “Buy stocks and coins, just as easy” solution, allowing customers to seamlessly experience virtual assets and securities services through their unique trading platform.

This year, Victory Securities achieved several notable milestones, becoming the first and only licensed financial group in Hong Kong to simultaneously acquire virtual asset trading, consulting, and asset management service licenses from the Securities and Futures Commission. However, with the recent approval for retail investors, Victory Securities is poised to continue its trailblazing journey in the virtual asset landscape.

Related Reading | CFTC’s Battle Cry Against Crypto Violations

Bitcoin Integration & High Stakes: Hong Kong’s Resurgent Investment Immigration

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Hong Kong, renowned for its dynamic financial sector, has reignited its investment immigration program, which was dormant for eight years. This revival comes with a fresh twist as a local lawmaker suggests including Bitcoin purchases on Hong Kong’s licensed exchanges as part of the program. 

According to the report, the rebooted program has set the entry threshold at approximately US$3.84 million, clearly indicating Hong Kong’s determination to attract high-net-worth individuals. The government unveiled eight plans to entice family offices to bolster this initiative, including the “Capital Investor Entry Scheme.” While the details are pending release later this year, the entry threshold is expected to rise to NT$30 million, creating buzz among potential investors.

PricewaterhouseCoopers has been inundated with inquiries from clients eager to participate in the program, foreseeing considerable demand. The firm hopes to collaborate with the family office tax preferential system, potentially offering immigration packages to qualified family offices, making it easier for members and their immediate families to secure visas.

Despite the tax incentives, some legislators believe that political considerations have prompted wealthy businessmen to move their assets elsewhere, and even more generous discounts may not lure them back. Instead, they propose attracting family offices from the Middle East and other regions.

Notably, the revived program doesn’t permit investment in real estate, and mainlanders still need to be included in eligibility. Wang Zhiwei, a partner at PricewaterhouseCoopers, highlighted the anticipation surrounding the program’s return, emphasizing that Hong Kong’s low tax rate and absence of inheritance tax continue to be attractive to prospective tax residents.

Investment immigrants must wait seven years to obtain permanent residency, a rule that Wang Zhiwei believes is unlikely to change.

Tax Benefits & Bitcoin Integration

Chiu Ta-kan, a lawmaker from the technology and innovation sector, has called for the clarification of asset categories. He suggests classifying Bitcoin traded on licensed virtual asset exchanges as financial products, opening a new avenue for investors. While some argue that property purchases should also be eligible, Chiu Ta-kan maintains a neutral stance.

Expanding asset classes is another avenue for attracting family offices, with tax concessions being a key factor. Wang Xiaoyan, a tax partner at PricewaterhouseCoopers Hong Kong, hopes to broaden the range of assets like bitcoin and income eligible for tax incentives, recognizing that family offices seek diverse investment opportunities.

Despite Hong Kong’s efforts, Zeng Peilin, chairman of the Tsang Group, stressed the need for more attractive measures to compete with jurisdictions like Singapore and Dubai. He emphasizes that political and global factors are pivotal in attracting wealthy investors.

Qiu Dagen, another prominent figure, suggests that the Middle East should be the primary target for family offices. He believes that the region’s political considerations make it a ripe market for Hong Kong to tap into.

While the government aims to attract 200 family offices by the end of 2025, there must be official data on the number of family offices in Hong Kong. Zeng Peilin argues that increasing investments in the city is more crucial than focusing on the number of family offices, with 10-year investments continuing to be an attractive proposition for potential investors.

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Hong Kong’s Bitcoin ETF Ambitions Unveiled

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Hong Kong is actively considering the introduction of a spot Bitcoin exchange-traded fund [ETF] in its crypto market, aiming to enhance its status as an Asia-Pacific digital asset hub. As reported by Bloomberg, this move comes as the city grapples with the aftermath of the JPEX scandal, a major financial fraud that recently shook the crypto community. In this scandal, the unlicensed JPEX crypto exchange was allegedly involved in duping over 2,530 individuals, leading to losses of HK$1.56 billion. Hong Kong police arrested 28 people, including a prominent crypto influencer, in connection with the case.

Despite these challenges, Hong Kong remains optimistic about the potential of spot Bitcoin ETFs, viewing them as a means to bring digital assets into the mainstream crypto sector. The Securities and Futures Commission [SFC] of Hong Kong, under the leadership of Chief Executive Officer Julia Leung, is open to innovative proposals that enhance efficiency and customer experience. Leung emphasized that while they are willing to explore new avenues, they remain committed to addressing potential risks associated with these innovations.

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Hong Kong's Bitcoin ETF Ambitions Unveiled 6

Several leading asset management firms, including CSOP Asset Management, Samsung Asset Management, and Mirae Asset Global Investments, have submitted their ETF applications to the SFC. Once approved, Bitcoin and Ether futures are expected to be live on the Chicago Mercantile Exchange, according to insiders familiar with the plans.

Hong Kong’s Bitcoin Ascent

Hong Kong has actively pursued its position as a digital asset hub, rolling out a dedicated virtual asset regulatory framework in June. This initiative aims to restore the city’s reputation as a cutting-edge financial center. Recent developments include the expansion of UK-based Zodia Custody, a digital asset custodian supported by Standard Chartered, into Hong Kong. Zodia Custody’s CEO, Julian Sawyer, cited the substantial demand for crypto assets, particularly from institutional entities, as a driving factor behind their decision to expand into the region.

Hong Kong’s efforts align with those of other jurisdictions seeking to develop digital-asset hubs, including Singapore, Dubai, and the European Union. Meanwhile, the United States has taken a more restrictive approach, imposing stringent regulations on the industry. As the crypto industry slowly recovers from the previous year’s $1.5 trillion market crash, Hong Kong’s proactive initiatives underscore its commitment to becoming a prominent player in the evolving digital-asset landscape.

Hong Kong’s Crypto Renaissance: 5 Regulatory Innovations After JPEX Scandal

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In the wake of the recent $165 million scandal involving the crypto exchange JPEX, the Hong Kong government is doubling down on its commitment to foster the growth of the Web3 market. In a statement from Hong Kong Fintech Week, Christopher Hui, the Secretary for Financial Services and the Treasury, delivered a keynote address outlining the regulatory moves Hong Kong authorities are set to implement, reassuring stakeholders that the JPEX scandal will not deter their vision for the region’s digital future.

The JPEX scandal, in which 2,500 locals alleged they were defrauded by the Dubai-based exchange, prompted swift action from the Hong Kong authorities. The Securities and Futures Commission (SFC) warned that JPEX was promoting its services locally without a license, leading to a call for tighter crypto regulations in the region.

Hui emphasized that the government’s commitment to the Web3 market remains unwavering. He asserted,

“We’ve been asked many times whether JPEX will affect our determination to grow the Web3 market — the answer is a clear ‘no.'”

This determination is reflected in the multifaceted approach being taken by Hong Kong regulators.

Crypto Task Force Targets Illicit Exchanges

The SFC has set up a task force in collaboration with the police to combat illicit crypto exchange activities. Furthermore, the SFC will provide guidance on tokenized securities and the tokenization of SFC-authorized investment products, reinforcing its commitment to facilitating responsible innovation within the crypto space.

Notably, the scope of crypto regulation in Hong Kong will expand beyond regulated trading platforms to cover all buying and selling activities, ensuring a comprehensive and robust framework.

A highly anticipated joint consultation on stablecoins by the Hong Kong Monetary Authority (HKMA) and the Financial Services and the Treasury Bureau is on the horizon. This initiative will solicit feedback on a January discussion paper and is expected to have a significant impact on the regulatory landscape.

Hui also revealed that the HKMA will engage with the sector to provide guidance on banks offering digital asset custodial services, signaling the growing involvement of traditional financial institutions in the crypto space.

In conclusion, the JPEX scandal may have exposed vulnerabilities in Hong Kong’s crypto sector, but it has not shaken the government’s determination to foster a thriving Web3 market. The regulatory moves outlined by Christopher Hui demonstrate Hong Kong’s resilience and commitment to nurturing responsible growth in the crypto industry, ensuring that it remains an attractive destination for blockchain and digital asset innovation.