Hong Kong is All Set to Strengthen Crypto Laws, after FTX Debacle
The collapse of the highly-reputed cryptocurrency exchange, FTX, has sent shock waves across the virtual currencies arena. Soon after the disaster, Changpeng Zhao suggested that more stringent regulations be in place. Zhao is the co-founder and CEO of Binance, the world’s largest digital currency exchange. It is a well-known fact that many investors peruse TradingOX, to know the details regarding diverse cryptocurrencies and digital currency exchanges.
His suggestion led to Paul Chan issuing a similar warning. Chan is the Financial Secretary of the nation. He emphasized greater transparency regarding crypto dealings. He also insisted upon appropriate monitoring when dealing with digital assets. In short, he advised caution.
The Scenario in Hong Kong
The Hong Kong Government issued a specific policy in October 2022. The Policy Declaration linked to the Development of Virtual Assets. This way, Hong Kong managed to initiate a regulatory framework. It also created a direction for issuing risk-based regulations.
Similarly, the nation decided to launch several pilot initiatives. They would serve as tests. The outcomes would enable advanced technologies to power digital assets.
Paul Chan wanted the Government to be cautious and steady while promoting the virtual asset industry. He expressed his thoughts in a post on social media. He added a poster to his write-up. It added more value to it.
The poster declared that it was good to actively embrace innovation. However, it was equally worthy to have a regulatory package in place. This package would have to keep in tune with changing times. This way, it would become easier to handle risks appropriately. It would also help in creating prerequisites for the vigorous and organized development of the cryptocurrency marketplace.
Colin Wu’s Feedback on Chan’s Thoughts
Colin Wu is a Chinese reporter. Wu went through Chan’s write-up. He appreciated that Chan was offering a sincere welcome to all the digital currency organizations across the globe.
The wording of the post sufficed to indicate that Chan did not want any other crypto venture facing bankruptcy. He believed that the strengthening of transparency and appropriate supervision would prevent a collapse like that of FTX’s.
Wu also pointed out that Chan was concerned about the excessive usage of innovative technologies. True, they had immense potential to do good, even when used to their fullest extent. At the same time, they could prove risky and even cause fluctuations. Therefore, users had to be always vigilant. Otherwise, the risks and adverse impacts would affect Hong Kong’s real economy.
Paul Chan had some advice to offer digital currency companies. One, they should offer separate accounts for hoarding clients’ digital assets. Two, cryptocurrency businesses would do well to keep a year’s worth of operating expenses in hand. Three, all organizations should practice transparency in operations. Four, every business should have adequate supervisory and security measures in place.
The Adverse Effects of the FTX Collapse
Why are the Hong Kong Government and Paul Chan so worried about the aftermath of the FTX collapse in November 2022?
After all, it displays valuable information for traders too. Probably, it is why numerous investors and traders trusted FTX, the profitable cryptocurrency exchange. Today, they are suffering huge losses due to the collapse.
Of course, the global cryptocurrency marketplace was not in a good state even before FTX crashed. The ongoing pandemic, geopolitical situations, inflation, and recession, had been causing immense chaos. However, the FTX collapse only added to the dismal situation. The prices of various cryptocurrencies, including Bitcoin, plunged. Therefore, the Hong Kong Government must also be pondering the wisdom of developing and promoting the virtual assets industry.
The FTX collapse has highlighted an important fact. Regardless of how large and profitable a crypto exchange may be, there is no guarantee that success will carry on forever. Anything can happen, and investors may discover that their funds are no longer safe.
It is the big institutional traders who are suffering. They had made huge investments in FTX. The smaller traders are not suffering too much at present. However, they may experience negative consequences in the long term. Everyone was happy to connect with an unregulated industry. Everyone was pleased that the industry was generally unregulated. Today, they feel that imposing strict regulations is much better for long-term safety.
