Scared away by regulatory clampdowns and uncertainty, cryptocurrency exchanges are fleeing Asia in general and Hong Kong in particular.
At least three major exchanges, including two from China and Hong Kong, have announced or floated the idea of stepping away from the region since the beginning of the year.
In April, the China-based Binance, the world’s largest digital coin exchange by traded value, said it is relocating to the more blockchain friendly Malta.
The news came after Binance was put under the spotlight as financial watchdogs across different counties including China, Hong Kong and Japan expressed concerns over the company, in particular its user verification process, which apparently only required an email address from its clients to open accounts and begin trading.
David Shin, President of the Singapore-based Asia Fintech Society, said in an interview with Bloomberg that “Binance lacks regulation and transparency and is like a van stopped in front of an office building selling coffee while the legit coffee shops on the street suffer.’’
Binance considered Hong Kong and Japan for a new home base but eventually decided on Malta, which promised the crypto exchange a much friendlier operating environment with less regulatory uncertainties. Maltese Prime Minister Joseph Muscat said he welcomed Binance’s decision.
“We aim to be the global trailblazers in the regulation of blockchain-based businesses and the jurisdiction of quality and choice for world-class fintech companies,” Muscat said.
Another exchange, Hong Kong-based Bitfinex, also announced in March that it is planning to evacuate Hong Kong and is apparently on its way to Switzerland, a country some traders call “Crypto Valley” due to its favorable regulations, a budding startup community and the recognition of blockchain.
Considering the recent crackdown on crypto exchanges in Asia, it is perhaps easy to understand why exchanges are moving out.
In January, Hong Kong’s Securities and Futures Commission (SFC) published a circular warning investors to be extra careful when dealing with bitcoin futures and other cryptocurrency-related investment products, while noting that such products have “potential great risks including illiquidity and high volatility.”
The warnings came before the regulator halted an initial coin offering (ICO) launched by the Hong Kong-based Black Cell Technology Limited in April and ordered the issuer to refund its investors, marking the first time a Hong Kong regulator has blocked this new means of fundraising.
Hong Kong is not the only place in Asia looking at more stringent regulations for crypto currency trading. Mainland China reportedly forced some exchanges to close in 2017. Japan’s regulators also began to strengthen their grip on crypto exchanges, with the country’s Financial Services Agency issuing warnings to some of them following the loss by Japan-based Coincheck of $530 billion worth of clients’ digital coins in January.
“There are a lot of considerations and issues regulators need to think about before cryptocurrencies could be adopted in more ways. The fact that crypto exchanges are run in offshore makes them more complicated in nature,” Ivan Lee, director of Banking and Financial Services from Tata Consultancy Services, told Harbour Times. “As a result, security is more of an issue.”
“Hacking and theft of such digital coins have been reported in recent months and more might come in the future,” he added. “In addition, we need to consider the impact to the traditional monetary system as well. More education regarding the risk associated with digital coins should be offered to the public.”
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