Concerns have been raised about the sustainability of Hong Kong’s ambition to become a cryptocurrency hub, as warned by a Chinese crypto pioneer, Bobby Lee, whose digital asset business in China was affected by a regulatory crackdown. In an interview with Bloomberg, Lee, who established China’s first Bitcoin exchange and founded the US-based crypto storage provider Ballet Global, cautioned that Hong Kong may reverse its stance on cryptocurrencies within the next three to five years and impose a ban on the industry.
The warning comes as Hong Kong prepares to issue licenses to crypto exchanges starting next month. Lee pointed out that officials who allowed exchanges to obtain licenses may have had unrealistic expectations of establishing connections with mainland China, despite digital asset trading remaining prohibited there.
Lee clarified that he was not blaming the Hong Kong government, acknowledging that in the larger scheme of things, “Hong Kong itself is a drop in the bucket.”
Meanwhile, Hong Kong’s securities watchdog has finalized its consultation paper on the proposed regulatory regime for crypto trading platforms, set to take effect from June. The new rules will permit retail investors in the city to trade specific “large-cap tokens” on licensed exchanges, subject to safeguards such as knowledge tests, risk profiles, and reasonable exposure limits. The agency will also start issuing licenses to crypto exchanges, emphasizing the need for robust investor protection measures.
However, uncertainties remain regarding the treatment of crypto derivatives, gaming-related cryptocurrencies, and utility coins under the new licensing regime. The presence of these gray areas, combined with concerns about the long-term viability of the regulatory framework, raises significant doubts.
Hong Kong, once a prominent digital-asset hub, began losing its position in mid-2022 due to regulatory ambiguities surrounding cryptocurrencies and the emergence of crypto-friendly rivals such as Singapore and Dubai.
As businesses navigate the evolving regulatory landscape, experts advise them to be prepared for shorter-term strategies rather than relying on a five-year road map. The recent crackdown on the crypto sector in the United States serves as a reminder of the potential challenges faced by businesses in the industry.
Hong Kong’s future as a crypto hub hangs in the balance as it grapples with regulatory uncertainties and intensifying competition from other global players.