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According to new research from Messari.io, proposed regulations for Hong Kong’s blockchain sector could have far-reaching consequences for the crypto derivatives market.
In a report released Wednesday, researcher Mira Christanto said the Hong Kong Special Administrative Region, which appears to be the dominant market for cryptocurrency trading, could block unregulated exchanges as part of a broader push for greater governance. .
The researcher cited a recent proposal from the Hong Kong Securities and Futures Commission, or SFC, that would require all cryptocurrencies to fall under anti-money laundering rules. This is a significant departure from just a year ago when the SFC announced that it would only regulate companies in the “securities” space.
Previously, the SFC only regulated assets that meet the legal definition of securities or futures, a definition that excluded cryptocurrencies.
As Cointelegraph reported earlier this month, the Hong Kong government has proposed bringing all cryptocurrencies under the supervision of its securities regulator. The regulatory push appears to be part of a global initiative to curb cryptocurrency exchanges, possibly under the pretext of money laundering concerns.
As Messari notes, Hong Kong appears to be the most dominant player in the cryptocurrency futures market. Almost three quarters (72%) of Ethereum (ETH) futures and 57% of Bitcoin (BTC) futures come from the Special Administrative Region.
Christanto said:
“Many people don’t realize the role Hong Kong plays in the global cryptocurrency space. Hong Kong is home to some of the largest companies and dominates the growing futures market. ”
Hong Kong is home to a large presence of cryptocurrency exchanges and market service companies, including BitMEX, Bitfinex, Crypto.com, and FTX. Exchanges like OKEx, Huobi and Bybit maintain regional offices in the semi-autonomous city-state. Big industry players like Tether, Cardano and EOS publisher block.one are also based in Hong Kong.
If the new proposal becomes law, companies that continue to operate without a license could face heavy penalties. There is also the possibility of prison sentences for the executives of the company who operate these platforms.
As Messari notes, to date, only two crypto financial services companies have been licensed in Hong Kong.
