In a bid to avoid other situations like that of FTX, Hong Kong’s financial secretary Paul Chan has called for proper supervision and transparency when handling digital assets in the country.
According to the release by the Hong Kong government, while it is important to embrace innovation and technology, it is equally important to put in place a regulatory framework that adapts and is in tune with the industry to properly manage risks and develop the market.
In light of FTX’s bankruptcy, Chan stressed the importance of being orderly and cautious to guard against the impact of these risks from being transmitted to the real economy.
Following the FTX crisis, the CEO of Binance Changpeng Zhao pointed out two main lessons the crypto industry should learn from. He said companies must make sure their collateral does not consist of a token that the company itself produced. Secondly, companies should avoid borrowing to maintain a large reserve.
Meanwhile, CZ’s advice has left other crypto firms cautious, and with this, the Hong Kong government has learned and is doing everything possible to avoid such a situation.
Hong Kong and the Crypto Industry
Hong Kong is consistently making moves to become a digital asset hub and a financial center.
Interestingly, the nation was one of the few that was regarded as “best prepared” for the adoption of digital assets. However, due to the several turn down in the global digital assets markets, investors in the nation reduced the amount of their portfolio’s exposure to cryptocurrency fluctuation.
Earlier this month, the Hong Kong regulator, the Securities and Futures Commission (SEC), after pondering on the need to allow retail investors to trade crypto, outlined the guidelines for entities who wish to offer an initial public offering of an ETF linked with digital assets futures.
Meanwhile, a report has shown that the country has also suffered from crypto scams. According to a report by thecoinrise.com, Hong Kong lost about $50 million to crypto scams in the first quarter of the year. The country is also making plans to launch its own Central Bank Digital Currency (CBDC).