China’s Central Bank Highlights Hong Kong’s Crypto Licensing in Recent Report

China’s Central Bank Highlights Hong Kong’s Crypto Licensing in Recent Report

China’s central bank, the People’s Bank of China (PBoC), has spotlighted Hong Kong’s growing crypto licensing framework in its 2024 Financial Stability Report. The report underscores the rising prominence of cryptocurrency as a significant global trend, with several countries actively adapting to the industry's demands through licensing and regulatory measures.


The PBoC’s report emphasizes the ongoing development of cryptocurrency compliance in Hong Kong, noting the region's efforts to implement a dual-license system for virtual asset trading platforms. This system differentiates between security tokens and non-security tokens, each with distinct regulatory requirements. Security tokens must comply with licensing standards set forth by the Securities and Futures Commission (SFC), while non-security tokens are governed under the Anti-Money Laundering bill.


The report also highlights the global shift towards accommodating the crypto industry. It states that 51 countries and regions have imposed restrictions on crypto assets, with many nations revising or enacting new regulations to facilitate the growth of the industry. Notable countries such as the United States, Japan, Singapore, the United Kingdom, and the European Union have made significant strides in ensuring clear guidelines and legal protections for crypto traders.


Hong Kong’s licensing efforts stand out as a major step toward legitimizing cryptocurrency in the region. In addition to the dual-license system, financial institutions in Hong Kong seeking to offer crypto-related services must also apply for registration licenses from financial regulators. Major banks like the Hong Kong and Shanghai Banking Corporation (HSBC) and Standard Chartered Bank are now required to incorporate crypto asset exchanges into their operational frameworks.


However, despite these advancements, Hong Kong is still lagging behind Singapore in terms of crypto licensing. Singapore has garnered attention for its swift progress, issuing licenses to 13 crypto firms in 2024 alone. In contrast, Hong Kong's regulatory framework faces significant delays, with crypto firms like OKX and Bybit withdrawing their license applications without providing explanations.


As of late December 2024, Hong Kong has granted licenses to seven crypto platforms, with four approvals occurring this month. Despite these developments, the licensing process has been slower than expected, with speculation that China's influence is playing a role. While crypto trading is banned in mainland China, traders in the region often bypass the restrictions using VPNs to access exchanges like Bybit hosted outside the country.


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