Hong Kong has taken a major step towards becoming a global blockchain and crypto hub with its newly launched Virtual Asset Service Provider (VASP) licensing regime. Major exchanges including Huobi, Gate.io, Bitget, ByBit and OKX have already applied for registration under the new regulatory framework, which is aimed at promoting the responsible and innovative development of the blockchain ecosystem. This follows the country’s recent leadership in tokenisation of securities, with the government becoming the first in the world to issue tokenised green bonds and the Bank of China issuing tokenised securities on the Ethereum blockchain.
The next focus for Hong Kong is stablecoin regulation, with the Hong Kong Monetary Authority currently conducting a public consultation on the matter. Cryptocurrency stablecoins are a fast-growing market, with the potential to anchor digital payment systems and connect the worlds of traditional finance and blockchain-based payments. However, there are also concerns about the risks associated with these instruments, particularly in terms of their potential to destabilise the financial system.
One company that has been at the centre of such concerns is Tether, the issuer of the stablecoin USDT, which has long faced accusations that it is not fully backed by reserves. While recent documents obtained through a Freedom of Information Law request shed some light on the company’s finances, they do not provide definitive proof one way or another. Tether has stated that it is committed to transparency and has pledged to engage more actively with regulators in order to promote responsible stablecoin use.
Meanwhile, leading crypto exchange Binance faces legal challenges on multiple fronts. The company has issued a cease and desist notice to a fraudulent entity using its name in Nigeria, while also fighting a lawsuit from the US Securities and Exchange Commission (SEC) regarding alleged breaches of US securities law. The SEC’s claims include that Binance has operated as an unregistered exchange and broker-dealer, and misrepresented its trading controls. Binance is registered in the Cayman Islands and the Seychelles, and is available in around 100 countries worldwide.