Hong Kong introduces crypto staking rules, reaffirms Web3 commitment

Hong Kong’s Securities and Futures Fee (SFC) has launched new pointers for crypto exchanges providing staking providers.

In an April 7 announcement, the SFC introduced new pointers for crypto exchanges providing staking providers and domestically approved funds uncovered to digital property concerned in staking. The announcement follows current remarks from Christina Choi, the SFC’s govt director of funding merchandise, who said throughout a speech on the Hong Kong Web3 Competition:

“The SFC is dedicated to supporting Hong Kong’s Web3 journey.”

In its announcement, the regulator mentioned it “acknowledges the potential advantages of staking in enhancing the safety of blockchain networks and permitting buyers to earn yields.” Consequently, the most recent steerage permits crypto exchanges to supply staking service choices.

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New guidelines for staking providers

The brand new guidelines have been communicated by the regulator in its newest round sent to crypto exchanges beneath its jurisdiction. The SFC requires crypto exchanges to acquire written approval earlier than providing staking providers, retain management over staked digital property and never delegate custody to 3rd events.

Cryptocurrency exchanges engaged in staking should disclose all related dangers and particulars regarding charges, minimal lock-up durations, unstaking processes, outage processes and custodial preparations to their clients. Lastly, the suppliers should report on their staking actions to the SFC.

The same round was sent to SFC-regulated crypto fund operators, with the brand new guidelines being related to funds with greater than 10% of their internet asset worth invested straight or not directly in digital property. Funds can solely purchase digital property which might be additionally straight out there to the native public and depend on SFC-authorized platforms. Leveraged publicity is prohibited.

Funds can interact in staking whether it is according to the fund’s targets, whereas offering clear disclosure and strong controls. An investor discover and presumably shareholder approval could also be required if staking implementation results in materials technique or danger profile adjustments.

Hong Kong bets on Web3

Throughout her current speech, SFC’s Choi acknowledged that the Web3 house remains to be evolving and that “its full advantages will unfold in time, seemingly with twists and turns.” She cited the speculative business of non-fungible tokens (NFTs) as a cautionary story that justifies warning within the present regulatory strategy:

“Due to this fact, fairly than chasing each new spark, we imagine in a realistic strategy — strengthening the basics and fostering a supportive ecosystem the place Web3 can thrive in a sustainable method.“

Associated: Hong Kong remains an ‘open and vibrant market’ for crypto, says financial secretary

The official’s feedback observe current experiences that cryptocurrency change Bybit announced the shutdown of its NFT marketplace because the market is working out of steam. The choice follows a similar decision by major NFT marketplace X2Y2 introduced in late March.

The non-fungible token market is seeing a big downturn. Each day NFT buying and selling quantity was over $18 million 364 days in the past earlier than Bybit’s bulletins and stood at $5.34 million when the choice to close down the platform was made public — a 70% fall.

When arguing why Web3 firms ought to select Hong Kong as their headquarters, Choi identified that Hong Kong ranks third within the International Monetary Centres Index. Moreover, native regulators have set clear pointers for crypto business companies, and Hong Kong gives easy accessibility to Asian markets.

In her closing statements, Choi mentioned, “We stand in the present day on the crossroads the place conventional finance and the digital financial system are converging to drive promising outcomes for our monetary markets.” She added:

“The zero-to-one breakthrough has been made, and its future success would very a lot rely upon how we nurture this convergence, that’s, how we go from one to 100.“

Her statements echo Hong Kong’s monetary know-how sector, which has seen 250% growth since 2022. The SFC lately launched a brand new roadmap to place town as a world cryptocurrency hub.

The “ASPIRe” roadmap hopes to future-proof the native digital asset ecosystem. It entails 12 initiatives unfold throughout 5 broad classes, which embrace offering market entry, optimizing compliance and frameworks and bettering blockchain effectivity.

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