Recent Developments in Cryptocurrency Regulations
Recent developments indicate a significant shift in the approach to cryptocurrency operations by Chinese financial institutions based in Hong Kong. Authorities have mandated that a range of entities, including internet platforms, securities firms, banks, and other organizations, suspend various activities related to cryptocurrencies. This includes halting investment, trading, and the issuance of real-world asset-backed tokens, as well as stablecoins.
Concerns Over Securities Firms
Of particular concern are the securities firms that have been authorized to offer virtual asset trading services, enabling their clients to directly engage in transactions involving major cryptocurrencies like Bitcoin, Ethereum, and Tether. Hong Kong has classified virtual assets into two categories: securities-type and non-securities-type assets.
Scrutiny of Investment Models
Reports suggest that the practices surrounding the “Treasuries Management Company” model, which has been widely adopted amid the latest cryptocurrency boom, are now under scrutiny. This model allowed for leveraged investments in cryptocurrency assets and had gained traction among numerous Chinese companies listed on both the Hong Kong and U.S. stock exchanges. These firms have been purchasing cryptocurrencies, expecting to gain from the appreciation of both their stock and cryptocurrency values.
However, the likelihood of regulatory restrictions on this investment strategy appears to be increasing, raising concerns about the future of these activities.
