Amid the news of Hong Kong’s invitation to Coinbase, Leo Weese, co-founder and President of the Bitcoin Association of Hong Kong, expresses his reservations about Hong Kong’s existing framework, describing it as highly unattractive. The market is relatively small and untested, lacking substantial banking partnerships, and characterized by significant product restrictions.
Hong Kong, has extended an invitation to Coinbase, amidst an ongoing lawsuit with the SEC, urging the cryptocurrency exchange to establish a presence in the territory. Hong Kong, currently in the process of formulating crypto regulations, appears to be a favorable option for Coinbase, given its rulebook and reputation as a dynamic market hub in Asia.
However, the reality on the ground reveals that Hong Kong’s proposed regulatory framework may not be as appealing to crypto exchanges as it initially seems. Limitations on the number of tokens available for trading, imposed by the Securities and Futures Commission, hinder the potential offerings compared to established exchanges.
Weese emphasizes the fundamental differences between Asian and Western markets, asserting that even if Coinbase were to give up its current customer base, success in Hong Kong is not guaranteed.
He highlights the potential attractiveness of Hong Kong for offering trading in tokens deemed unregistered securities elsewhere, such as decentralized protocols, as many tokens in Hong Kong are not considered securities and do not require registration
Furthermore, there is a mandatory 12-month cooling-off period between token launch and listing. Hong Kong also prohibits stablecoins, crypto derivatives, earn or lend programs, and is likely to restrict staking services and airdrops.
Nevertheless, Weese cautions that relocating to Hong Kong would not automatically provide Coinbase with immunity from U.S. regulations or SEC oversight. This has been evident in the cases of BitMex and Binance, both of which faced regulatory entanglements with the United States despite their Hong Kong origins and offshore status of their founders.
While Hong Kong presents itself as an inviting option for Coinbase due to its ongoing crypto rulemaking efforts, the existing regulatory landscape, limited token availability, and constraints on various crypto activities make it a less attractive destination for the exchange. Furthermore, any move to Hong Kong would not absolve Coinbase from U.S. regulations or SEC scrutiny, as demonstrated by previous cases involving other crypto entities based in Hong Kong.