Secretary of the Financial Services of Hong Kong, Professor KC Chan announces no intention to specifically regulate cryptocurrencies.
Speaking during a session of the Legislative Council, Chan read out a statement that the government does not see a need to regulate the digital currency sector beyond the existing anti-fraud controls already in place.
The opinion is based on the small number of vendors who accept bitcoin as a payment. The Financial Services body therefore continues to consider it as a virtual commodity.
“There are only a very small number of vendors claiming that they would accept bitcoins as a medium of payment. We therefore consider that bitcoins and other kinds of virtual commodities do not qualify to be an e-currency, having regard to their nature and current circulation in Hong Kong.”
“As such, the Government does not consider it necessary to introduce at the moment new legislation to regulate trading in such virtual commodities or prohibit people from participating in such activities.”
The Secretary explored the subjects further in answer to the initial question, justifying the lack of specific monetary controls on virtual commodity sector, with the following analysis:
“It is also unlikely that bitcoins, given its circulation, will pose a significant threat on Hong Kong’s financial system.”
The subject arose after an executive council member asked for a government response to the collapse of the MyCoin digital currency exchange in February. Up to 3,000 investors are believed to have lost in the region of US$23.2 million in the fraud, although some earlier estimates had placed this figure as high as US$386 million.
Policy in mainland China remains opaque towards Bitcoin, with a government ban on bitcoin transactions for banks, retailers and payment firms, despite steady growth in the Bitcoin sector itself. Digital currency trading volumes in the country have continued to grow, with one report finding BTC-CNY transactions accounting for 80% of total global trading.
The Hong Kong statement goes on to describe the normal financial controls that exchanges and financial services are already subject to such as “money changing or remittance services [being] required to apply to the Commissioner of Customs and Excise for a ‘money service operator’ license.”
This hands-off approach by the Hong Kong administration could therefore be seen as a move to remain reasonably in-line with Chinese policy, where Bitcoin is also considered to be a virtual commodity. A recent move to increase start-up venture capital investment on the mainland though, may be the first indication of more favorable policy on the horizon.
Hong Kong has existed as a Special Administrative Region of China since the 1997 handover from British control. This means the island is able to draft its own regulations and basic law, although in practice, the powerful pro-Beijing lobby ensures that policy remains largely in-line with the direction of mainland China.