• Hong Kong eases rules for crypto exchanges to access global liquidity and strengthen fintech growth.
• The new framework adds licensing for dealers, custodians, and stablecoins to enhance oversight.
• Reforms aim to make Hong Kong a key global hub for regulated crypto exchanges.

Hong Kong is implementing regulations on digital assets to enable crypto exchange access to international liquidity markets. The update was announced by the Securities and Futures Commission (SFC) at the Hong Kong Fintech Week. 

The new structure will allow crypto exchanges to connect local trading systems to international books of order, eliminating constraints that confined operations within city boundaries. 

The move was confirmed by SFC Chief Executive Officer Julia Leung, who said it would bring traditional financial markets closer to digital asset regulations. She observed that the crypto exchanges will be flexible after the investor protection measures have been verified. Leung termed the move a milestone for the city in terms of digital finance aspirations.

Hong Kong’s Shift in Crypto Exchange Regulation

Since 2022, Hong Kong has rolled out a system of licensing crypto exchanges, permitted Bitcoin and Ether exchange-traded funds, and permitted regulated funds of digital assets. Even with this, digital asset trading remains disadvantaged compared to other markets, such as the United States, which have been more adaptable in establishing cryptocurrency regulations.

According to Leung, Hong Kong has been quite tough in its regulation of crypto exchanges. She clarified why the SFC relaxes regulations once the insurances of the investors are well cemented. 

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This cautious step-by-step process is depicted by the recent loosening of global liquidity. Her statements emphasized the intention of the regulator to balance the growth of the market with responsible regulation.

The SFC is also formulating dealer and custodian licensing regulations for traders in digital assets. Also, the first licenses will be supplied by the Hong Kong Monetary Authority in the coming year. The new framework is designed to empower transparency and compliance in the crypto exchange and other service providers.

Hong Kong Opens New Avenues for Licensed Brokers

Further changes can allow other licensed brokers, not only crypto exchanges, to have access to world liquidity pools. That would simplify the process of access by companies like Binance and Coinbase that would be licensed as brokers, rather than full-scale exchanges. The existing exchange approvals are usually time-consuming as they may last for years, restraining market expansion prospects.

There are currently 11 crypto exchanges with full licenses issued by the SFC and 49 brokers trading using omnibus accounts. The SFC will also ease the token listing requirements, such as the track record requirement of 12 months on professional investors and approved stablecoins. This reform will ease the process of listing compliant crypto exchanges.

The new governmental framework of LEAP is based on clear legal frameworks, market building, and implementation in real life. It will result in a stablecoin licensing regime starting on August 1. There will also be tokenized government bonds and ETFs, and the establishment of secondary markets at licensed crypto-exchanges.

Hong Kong is seeking to apply tokenization to other industries in metals and renewable energy. The city strengthens its objectives of being the world center of licensed crypto transactions and green fields of fintech development by incorporating blockchain with real-life objects.

Also Read: Hong Kong Workers Exposed After Using Electricity From Care Homes to Mine Bitcoin