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Hong Kong: Financial Regulators Have Sung The British Anthem

Oleg Koldayev

Hong Kong is introducing new rules for funds and exchanges working with virtual assets, ignoring, in this case, the all-Chinese ban. The authorities and regulators of one of the financial capitals of the world firmly adhere to the principle of “one country - two systems”, and will protect it, if necessary, to the last drop of their blood.

According to the idea of Hong Kong lawmakers from the Securities and Futures Commission (SFC), digital trading platforms and financial organizations should live under the same laws as their counterparts in the fiat economy. Officials motivate it by the fact that the rapid expansion of the industry has led to the emergence of organizations that are entirely focused on the “pump and dump” strategy on the market.

“The digital market is still very young and therefore its current rules of the game cannot always be transparent and fair,” the Head of SFC Ashley Alder says. “Interruptions are not uncommon, as well as market manipulation and the misuse as open as the day.”

In order to force speculators out of the market, funds with assets that contain more than 10% of digital coins will be made to obtain a license from the regulator, the Securities and Futures Commission. Financial institutions will no longer be allowed to experiment with trade manipulations and money laundering.

Crypto-exchanges will face the same fate. Binance, OKEx, BitMEX, and other major market players are now registered in Hong Kong. For some time, this region has become the main haven for digital companies forced out of the Chinese market. However, the regulation rules no longer promise an easy life for digital exchangers. Marketplaces that join the new “legal sandbox” will have to go through a licensing procedure, as well as submit to the regulator the information about how they manage risks and ensure that financial products comply with current rules.

Moreover, the exchanges will no
longer be able to offer their users additional financial motivation, to trade
in futures and derivatives, as well as turn a blind eye to manipulations. “There are actually two possible ways for the digital assets market: regulation or prohibition. Hong Kong has decided to regulate and this is a sensible step,” Ursula McCormack, a Hong Kong partner at King & Wood Mallesons international law firm said.

We would like to agree with the expert in everything, but we have trouble with doing this.

On the one hand, Hong Kong does not really follow the all-Chinese way and does not declare the circulation of virtual assets and transactions with them being illegal. “Regulation, not prohibition” is a sensible step, which businessmen, investors, and consumers expect from the governments of many states. Moreover, the market has been dreaming about the legal regulation of cryptocurrency funds for several years, since many of these “funds” became financial pyramids long and reap the rewards from their clients.

But on the other hand ... Hong Kong regulation rules appeared exactly two days later after the British Government Cryptocurrency Commission had published its report on the dangers of many types of digital exchange assets, including derivatives and futures. And the ink on it never got a chance to dry, as Hong Kong is already putting them into action. Yes, British jurisdiction is a model for many, but the Hong Kong authorities are trying too hard to do everything possible to emphasize the English roots of their economy and law.

Of course, Britain is afraid of cryptocurrencies, if just for their anonymity and the potential possibility of financing various extremist groups. Everyone began to forget about the IRA, but in connection with BREXIT, it can draw attention to itself. Although this is only the English political reason, a system error can accumulate. Copying other people's attitudes may lead to borrowing other people's mistakes or political compromises. The more such copies there will be, the slower the market will progress.

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