Hong Kong's New Regulation 'Might' Be Harmful for Local Crypto Industry, Experts Say

New regulations for crypto-related companies, which Hong Kong's Securities and Futures Commission earlier announced, might prevent crypto entrepreneurs from entering the market.

Timothy Loh, owner of a local law firm, told Nikkei that some entrepreneurs might decide not to participate in the new framework in order to "Maintain their current shares in the market".

The counter argument is that a stricter policy may lead to greater investor confidence, Nikkei notes.

The SFC first announced the new regulatory framework in November.

The guidelines compared cryptocurrency exchanges to existing licensed providers of automated trading services, pointing out that they also need to protect investors.

The SFC has major concerns about money-laundering cases and fraud, which have prompted the regulator to introduce new legislation.

Under the new guidelines, investment funds are obliged to obtain a license from the SFC in the event that more than 10 percent of their assets consist of Bitcoin or other cryptocurrencies.

The new regulation also refers to initial coin offerings, Nikkei reports.

Hong Kong is known for its significantly more lenient approach towards cryptocurrencies in comparison to mainland China, which upholds an effective ban on crypto activities.

According to a recent report published by CryptoCompare, the highest quantity of top exchanges is still located in Hong Kong and Singapore.