Hong Kong stresses ‘steady and cautious’ approach to virtual assets in wake of FTX collapse

Hong Kong Financial Secretary Paul Chan speaks during the Global Financial Leaders’ Investment Summit on November 2. (Source: Hong Kong SAR Government)

Hong Kong should take a “steady and cautious” approach to developing its virtual asset businesses, its finance chief said in the wake of FTX’s collapse and at a time the city seeks to establish itself as a digital asset hub.

In a message posted to his office’s blog on November 13, Financial Secretary Paul Chan wrote that Hong Kong should embrace innovation and fully ultilize the potentials of Web3 technologies while keeping the risks involved under “proper” supervision.

His remarks came days after FTX, the world’s second largest crypto exchange platform that has been recently plagued by financial problems, filed for bankruptcy in the United States. FTX moved its headquarters from Hong Kong to the Bahamas in late 2021, with then-chief executive Sam Bankman-Fried hailing the archipelago as having a comprehensive regulatory framework at the time.

The collapse of FTX led to considerable losses by institutional and retail investors and raised concerns if the impact would spill over to the rest of the crypto market. 

Without naming any firms, Chan said “that one and another virtual asset trading platforms have filed for bankruptcy shows exactly that only with transparency and under proper supervision, the industry can develop in a steady, sustainable manner.”

He said however that Hong Kong remains committed to push for the development of its virtual asset market, as reflected in a government policy statement announced on October 31.

The statement proposes, among other things, setting up a regulatory framework for stablecoins as well as allowing retail investors to trade in cryptocurrencies.