Letters | Cryptocurrency bear market is an ideal time for Hong Kong to put its regulatory stamp on virtual assets

Readers discuss why Hong Kong’s announcement of a policy statement on virtual assets is timely, and the need for more scrutiny for companies under the technology voucher programme

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Pedestrians cross a road in Hong Kong on October 15. Hong Kong wants to become an international centre for virtual assets as the city seeks to bolster its status as a global financial hub after pandemic disruptions. Photo: Bloomberg

Published: 11:30am, 15 Nov 2022

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Last week’s events in cryptocurrency have been described as the industry’s Lehman Brothers moment. It comes days after Hong Kong FinTech Week at which the Financial Services and the Treasury Bureau announced its policy statement on virtual assets.

The statement set out Hong Kong’s vision for and approach to developing a vibrant virtual asset sector. This includes a consultation on how retail investors could be given a suitable degree of access to virtual assets. It is welcome news for the local cryptocurrency community, which has long lobbied for regulatory clarity and provisions for retail trading.

Some critics argue that the policy statement has come too late, missing the opportunity to capture the cryptocurrency bull run when firms were most actively investing and hiring in the city. Against the backdrop of last week’s drama, some might be left wondering whether it’s all over before it’s even started.

Whether the announcement was timed or not, if Hong Kong wants to become an international virtual asset hub, it is better off showing its hand and developing regulation during a messy bear market than a bull market. Reforms following the 2008 global financial crisis have led to stronger banks which, as we head into global economic headwinds, are in a much better position to weather storms.

To quote Warren Buffett, “only when the tide goes out do you discover who’s been swimming naked”. The bear market is the retreating tide, and more naked swimmers will be exposed as more cryptocurrency companies make disclosures. Those that survive or emerge from this are likely to become part of the next Big Techof the Web3 era.

This perfect storm is a good stress test for Hong Kong’s regulators in developing the fabric upon which a sustainable and resilient international virtual asset hub can be built.