Hong Kong's central banking agency has made it clear that crypto companies that have been lured by the city's desire to become a hub for digital asset businesses will not operate in a very light-touch regulatory environment.

In an interview on Tuesday, Eddie Yue, chief executive of the Hong Kong Monetary Authority (HKMA), elaborated on this point: "Our regulation is going to be tough. We're going to let these crypto companies create an ecosystem here, which brings a lot of exciting opportunities to grow. But that doesn't mean deregulation."

A Bloomberg report quoted Yue as saying that on June 1, Hong Kong will launch a new licensing system for virtual asset service providers. The program will also allow retail investors to acquire and trade major cryptocurrencies such as Bitcoin and Ether.

The move in favor of cryptocurrencies is part of an effort by the authorities of the Chinese special administrative region to restore Hong Kong's status as a major financial center after restrictions were imposed in response to the coronavirus pandemic and political unrest.

While there has been no change in China's official policy on cryptocurrency-related activities, which remain heavily restricted on the mainland, there are signs that Hong Kong's push to become a major hub for digital assets has Beijing's backing.

A report at the end of March showed that China's state-owned banks are ready to provide services to cryptocurrency companies in the city. Eddie Yue told the Bloomberg Wealth Asia Summit that further guidance on providing banking services to clients in the sector is in the works.

Following last year's market crash and the collapse of major players such as leading cryptocurrency exchange FTX, regulation of the industry has been tightening around the world. For example, the United States has been cracking down on crypto businesses through enforcement actions and lawsuits, while Hong Kong seems to be moving in the opposite direction.

Eddie Yue commented that cryptocurrency regulation in Hong Kong has been very strict over the past few years. He stressed that this regulation has now been reduced to a "reasonable and sustainable level", but they will not allow any FTX-type incidents to happen again in the city. Hong Kong's legislative framework for introducing new cryptocurrency rules will bring transparency and clarity, Yue insisted in the interview.