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Hong Kong regulators set to ban retail Bitcoin trading

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The Hong Kong authorities have put forward a legislative proposal that will prohibit retail investors from trading Bitcoin and other cryptocurrencies, and will oblige exchanges to obtain licenses.

Thus, the new law only allows professional investors to invest in Bitcoin. According to Hong Kong rules, an individual or legal entity with a portfolio of at least HK $ 8 million (about $ 1.03 million) can be considered a professional investor.

The Bureau of Financial Services and Treasury published a proposal in November 2020 for consultation with industry and the public. After three months, the document turned into a bill and this year it may become a law.

Stricter supervision of exchanges in Hong Kong

In addition to banning retailers, the regulator also wants to strengthen supervision of exchanges. Currently, exchanges in the region must voluntarily obey the regulatory body. However, the FTSB wants the Securities and Futures Commission to have more power over the exchanges.

The proposed law would require trading platforms, custodians and virtual asset financing service providers to apply for a license with the Securities and Futures Commission (SFC). One of the requirements for them will be servicing “only professional investors”.

Industry insiders believe that if the regulations are adopted, companies and fintech specialists will lose interest in Hong Kong and move to countries with more favorable regulation.

The industry is still in its early stages of development and regulators need to provide more open space for innovation and entrepreneurship.

Around the world, regulators are tightening their policies on cryptocurrencies as the industry grows too big to ignore. The most recent of these is Hong Kong, a global crypto financial center that seeks to tighten its grip on the industry.

However, limiting the ability to trade only to professional investors could result in Hong Kong’s loss of competitiveness. Vis-à-vis other markets such as the United States, the United Kingdom and, in particular, Singapore.

In explaining the requirements of the new rules, the Bureau referred to the need to comply with the FATF standards.

Conclusion

Of course, more oversight of the exchanges needed. The more the industry is regulated, the easier it will be to attract institutional investors. The ruling will also eradicate fraud in the up-and-coming industry. However, a retail ban can do more harm than good. If the region passes this law, it will effectively prevent retailers from entering the market. This will be a significant blow to an industry that was founded to undermine the centralization of power, especially in the financial services industry.

First, it will exclude a staggering 93 percent of Hong Kong residents from cryptocurrency.

Approximately 504,000 residents have assets in excess of $ 1 million. In a region of approximately 7.4 million people. This means the vast majority of residents will not be able to invest in cryptocurrency.

Media previously reported that the SFC’s proposed restrictions on retail investors threaten the operation of Bitcoin ATMs in Hong Kong.

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