Hong Kong plans to implement new ways to avoid a crisis like FTX

The Hong Kong government the Policy Declaration on the Development of Virtual Assets in October

Published: Nov 14, 2022 05:24:25 PM IST

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Hong Kong's Financial Secretary urged for a greater emphasis on openness and proper supervision when dealing with virtual assets. This happened just days after Binance CEO Changpeng "CZ" Zhao warned of more regulatory scrutiny in the aftermath of the FTX collapse.

Financial Secretary Paul Chan emphasised the significance of being "steady and careful" in fostering the development of the Hong Kong virtual asset market. A poster that accompanied Chan's post, roughly translated as follows:

“While actively embracing innovation, there must be a regulatory package that adapts and keeps pace with the times to properly manage risks, create prerequisites for the orderly and vigorous development of the market.”

The Hong Kong government announced a policy titled Policy Declaration on the Development of Virtual Assets in Hong Kong in October. This established a regulatory framework and risk-based regulatory direction. Furthermore, the government proposed many pilot projects to test and improve the technology that powers virtual assets.

According to Chinese journalist Colin Wu, Chan's post can be interpreted as a manifesto to welcome crypto companies from all over the world. In her own words:

“The Financial Secretary of Hong Kong said that because of the bankruptcy of FTX, transparency and proper supervision must be strengthened.”

Chan was unconcerned about FTX's demise. Instead, he emphasised the need to preserve safety and risk management, noting that:

“We must not only make full use of the potential brought by innovative technologies, but also be careful to guard against fluctuations and potential risks that may be caused by them, and avoid these risks and impacts from being transmitted to the real economy.”

Furthermore, he advised crypto companies to maintain client assets in separate accounts. According to Wu, Chan also advised crypto enterprises to set aside actual operating expenses for at least 12 months, among other criteria.

Finally, Chan stated that with transparent operations and competent and suitable monitoring, a stable and sustainable crypto sector would become a reality.

FTX CEO Sam Bankman-Fried and two of his associates are currently planning to relocate their operations outside of the United States in order to avoid punishment. However, according to a pact made between the two countries, the plan to escape Dubai may not be realistic.

If the FTX members try to reach Dubai, the agreement between the two countries allows authorities to detain them at the airport and deport them to the United States.

Shashank is founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist.