Hong Kong has proposed a new scheme to regulate the crypto industry, aiming to implement a licensing system for crypto service providers.

In this article, we will delve into cryptocurrency regulations in Hong Kong, Macau and Taiwan, the three major Chinese societies outside mainland China, and find out how digital assets will be regulated in these regions in the future.

About Hong Kong, Macao and Taiwan

Hong Kong is a major financial center and one of the most developed cities in the world, with a population of 7.5 million. As a former British colony and one of only two special administrative regions in China that currently includes Macau, Hong Kong enjoys an economic system independent of the rest of China, as does Macau, but given its size, Macau relies heavily on the gambling industry, while Hong Kong's economy is more diversified and dynamic.

As a geopolitical hotspot, Taiwan is also one of the more successful and developed economies in Greater China. Being politically and geographically separated from mainland China, Taiwan has a softer approach to cryptocurrencies than the more iron-fisted policies across the strait.

Cryptocurrency legitimacy

- Hong Kong: There is currently no law specifically addressing cryptocurrency regulation in Hong Kong. Bitcoin and other cryptocurrencies are not considered legal tender or securities, but virtual commodities. Hong Kong government officials have warned the public in advance against investing in cryptocurrencies. According to Hong Kong's Securities and Futures Commission (SFC), ICO tokens will be regulated as securities under Hong Kong's Securities and Futures Ordinance and will require permission and authorization from the SFC. Furthermore, as long as the acquisition and transfer of tokens is done in good faith and does not violate anti-money laundering rules, private ownership or cryptocurrency transfers between private parties remain unregulated.

- Macau: Macau does not accept cryptocurrencies as legal tender. In 2017, the Macau Monetary Authority issued a statement warning banks and payment institutions not to directly or indirectly participate in or provide any financial services related to cryptocurrencies. Any financial institution that provides regulated financial services without authorization is in violation of Macau's Financial System Law. However, in the private casino sector in Macau, there are no regulations restricting ICOs.

- Taiwan: Cryptocurrencies are not currently subject to any formal laws or rules in Taiwan. Bitcoin and other cryptocurrencies are often described by Taiwan's Financial Supervisory Commission (FSC) as highly speculative virtual commodities that are bought and sold for profit. In addition, the FSC has repeatedly warned the people of Taiwan that cryptocurrencies are extremely dangerous and speculative investments.

Crypto trading platform in Hong Kong, Macao and Taiwan

In Hong Kong, with the introduction of the latest legislation, cryptocurrency regulations will be ready to establish a licensing system for service providers. In Macau, because the city itself is so small, there is hardly much room for crypto trading, and most Macau investors are actually part of the Hong Kong crypto market.

In Taiwan, platforms offering cryptocurrency services can provide services in the form of offshore or onshore businesses. They are usually funded by the creators of such online businesses, as well as investors who buy shares in them. Among them, MaiCoin is the largest bitcoin exchange in Taiwan, founded by Liu Shiwei in 2013.

Crypto regulatory trends in Hong Kong, Macao and Taiwan

Over the past year, Hong Kong has seen a number of major regulatory changes that have had an impact on the cryptocurrency industry. These changes are in line with global trends and are designed to push for a stronger regulatory control framework in Hong Kong as local crypto trading activity continues to grow.

Macau, on the other hand, continues to face the issue of how to align/balance with mainland China and Hong Kong.

In Taiwan, the Financial Supervisory Commission introduced the Fintech Development and Innovation Experiment Regulations, which created a regulatory sandbox system, in 2018 with the aim of promoting the development of fintech. In addition, Taiwan has passed laws governing the sale of securities tokens, although online trading platforms generally consider these standards to be too onerous. In the near future, Taiwanese authorities are expected to provide guidelines on anti-money laundering for cryptocurrency service providers.

Source: FX110