Crypto regulation in the world: weekly digest #42

Hong Kong

Hong Kong is preparing to become the new global crypto center and has been opening its doors to retail crypto investors since July. With the establishment of a regulatory framework for cryptocurrencies, the Hong Kong authorities are actively urging crypto companies to start operating in the city. Applications have already been submitted by the largest crypto exchanges, such as Huobi.

This week, the Hong Kong Monetary Authority (HKMA) called on financial institutions to provide services to licensed crypto companies. In a statement published on the regulator’s website the HKMA also reminded banks to adhere to a «risk-based approach» when conducting customer due diligence (CDD) and avoid unnecessary processes, and refrain from adopting a «one-size-fits-all» approach to reject account opening applications.

According to Bloomberg, the Hong Kong authorities intend to allow retail investors to trade major cryptocurrencies such as BTC and ETH under a new crypto platform licensing regime.

In March, the Hong Kong divisions of China's Bank of Communications, Bank of China, and Shanghai Pudong Development Bank have started offering banking services to local crypto firms or have made inquiries to the field. Hong Kong’s biggest virtual bank, ZA Bank, plans to offer token-to-fiat currency conversions over licensed exchanges.

The HKMA also announced that financial regulators, including HKMA, Central Bank and the Securities and Futures Commission (SFC) will hold a roundtable for banks and crypto firms to ease financing for the sector on April, 28. It is also planned to issue comprehensive guidelines on licensing regime for crypto exchanges in the coming month.

Hong Kong has every chance to achieve its goals due to the ongoing regulatory pressure on US crypto companies. Due to the growing tension, many crypto firms are considering to leave the US market or suspend their activities in the USA.

USA

The banking crisis continues in the US. The Federal Deposit Insurance Corporation (FDIC) is preparing to place First Republic Bank under receivership. The bank's shares fell more than 50% due to this news. The FDIC believes that the situation of the troubled regional lender has worsened, and there is no more time left to bail out the bank with private capital.

At the same time, it is known that such large banks as JPMorgan Chase & Co and PNC Financial Services Group compete for the purchase of First Republic, according to The Wall Street Journal. First Republic reported this week that its deposits fell by more than $100 billion in the first quarter. If the bankrupt bank goes into receivership, it would be the third US bank to fail since March 2023.

It is noteworthy that the price of bitcoin and other cryptocurrencies rose by 7% after the news about new problems in the US banking system and possible escalation of the banking crisis in the United States.

Zimbabwe

The Central Bank of Zimbabwe plans to launch a digital currency forthcoming months by introducing gold-backed tokens that can be transferred between people and companies as a form of payment. The decision is aimed at shoring up Zimbabwe’s faltering national currency, the Zimbabwe dollar, which is fast depreciating amid yearslong economic woes in the African country.

Same national tokens backed by country’s government are already in use in Venezuela and Central Africa. Venezuela launched its Petro backed by nation’s enormous oil reserves in 2017 to use in a foreign trade and investments due to the galloping inflation in the South American country. The country’s economy has been in an acute crisis since the beginning of the 21st century. Inflation in 2020 has exceeded 2000%, more than 3 million people left the country. The gold-backed Sango coin of Central African Republic (CAR) was launched in 2022 to empower foreign investments in the country’s economy. A bit later, the Central African authorities went even further and made bitcoin a legal tender, becoming the world’s second nation to adopt decentralized cryptocurrency as national currency after El Salvador.

The Bahamas, Nigeria and China have already launched central bank digital currencies (CBDC) backed by their central banks, with several other countries, including India and Russia, running trial projects. But CBDC is not equal to a digital token, as it is a third form of money along with cash and electronic money. The project of Zimbabwe seems most similar to the CAR and Venezuela’s tokens than to CBDC.

News from other countries:

• The Bahamas is seeking to tighten its crypto laws in the wake of the collapse of FTX, according to a consultation document published this week.

• South Korea’s legislation on how to regulate digital assets, which has an emphasis on consumer protection, passed the first phase of review in the country’s National Assembly on Tuesday.

• Russia is going to create a special committee responsible for crypto. It will issue licenses for companies that want to use cryptocurrency in the operations related to international payments.

• The Kenyan Treasury will start levying taxes on revenues earned by cryptocurrency exchanges used by an estimated 4 million local residents.

• Ukraine is going to present its new crypto regulation synchronized with the EU MiCA bill later this year. We continue to highlight the news of the world of crypto regulation worldwide. Please stay with us!