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HashKey Wins Exchange License to Offer Crypto Retail Trading in Hong Kong

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Hong-Kong based digital asset firm HashKey has today launched a crypto over-the-counter (OTC) trading service, HashKey Brokerage, after being awarded an exchange license to offer crypto trading at a retail level by the city state's regulator, the exchange firm said on Thursday.

HashKey's virtual asset exchange operations previously focused on professional investors whom it offered crypto exposure. Retailers can now, too, access specific ‘high-value' tokens, including Bitcoin and Ethereum. Though the approval had yet to be confirmed by the Securities and Futures Commission (SFC) at press time, the announcement makes HashKey the first entity to be permitted to serve retailers under the new Virtual Asset Service Provider (VASP) licensing regime.

“HashKey Exchange, a licensed virtual asset exchange in Hong Kong, has upgraded its Type 1 & 7 Licenses to offer retail services. Now, all users can enjoy a safe and simple trading experience!” HashKey posted on X.

The local exchange unit, which operates under HashKey Group, previously featured in a voluntary licensing program – alongside fellow digital assets trading platform OSL – before upgrading its Type 1 and Type 7 licenses. HashKey Group, the parent company, earlier this year disclosed plans to enter Hong Kong as a regulated exchange giving a Q2 timeline. The Asia-based financial services group was also reported to be in early talks to raise up to $200 million at a $1 billion valuation in May to fund its foray into Hong Kong.

OSL, the digital assets subsidiary of BC Group, was previously awarded only approval-in-principle for its applications for Type 1 (securities) and Type 7 (automated trading service) licenses. Keith Choy, interim head of intermediaries at Hong Kong's Securities and Futures Commission (SFC), asserted earlier this year that a Type 7 license is mandatory for operators of platforms looking to offer trading of virtual assets categorized as securities or futures per the SFO.

Hong Kong's new digital assets regulatory framework

Hong Kong's crypto regulatory framework went into effect on Jun 1 as part of efforts to attract investors and transform the local market into a global financial hub. The new mandatory rules require that crypto trading platforms obtain a license to serve retail investors. The city also urged local banking firms to welcome strategic and business partnerships with crypto firms looking to establish a regional presence. While Hong Kong appeared to have attracted several firms, including leading industry names like HTX, OKX and Amber Group, the interest in its emerging market is still yet to materialize.

Earlier this year, the city's plan to become a leading player got a boost from innovation venture Plutus VC which sought to establish the ProDigital Fund. The firm said in March that it had already received commitments amounting to $30 million in the half-year fundraising period and intended to raise $100 million by the close of 2023. The initiative will comply to Hong Kong's policies, and the duo of Ng and Shi hopes to grow its reach into other regions, including Australia, Singapore, Europe, and the US.

ProDigital Future will invest in a range of Web3 startups in their initial phases of growth, particularly those in the tech industry that have affiliations with China and are moving towards Web3.

China closed doors to crypto but opened those leading to Web3 innovation

In contrast to the picture in Hong Kong, mainland China has maintained its previously-enforced ban on crypto activities of any kind. Beijing, however, released a White Paper exploring Web3 development and innovation in May. The Beijing Municipal Science and Technology Commission, in collaboration with the Zhongguancun Science and Technology Park Management Committee, unveiled the paper at the Zhongguancun Forum on May 27.

It defined Web3 as an inevitable evolution of the internet, centered on an immersive three-dimensional realm fusing reality and virtual reality via highly interactive experiences. The paper explored the challenges and plans to foster innovation and development of decentralized blockchain technologies, the metaverse, and non-fungible tokens (NFTs) built on the new iteration of the internet. Binance CEO Changpeng Zhao noted the interesting timing of the development, while Tron's Justin Sun commended China’s forward-thinking endeavor to embrace Web3 as an essential step towards recognizing the transformative capabilities of these technologies.

How far gone is the Web3 evolution?

The research paper dissected Web3 into four layers: the infrastructure layer, encompassing technologies like artificial intelligence and blockchain; the interactive terminal layer, consisting of equipment and technical support for interacting with both real and virtual worlds; the platform tool layer, providing technical support for the creation of digital environments, and the application layer for delivering application services.

In exploring the industrial development landscape, Beijing identified generative artificial intelligence, XR interactive terminals, and content production tool platforms as crucial areas of research and innovation within Web3.  It further recognized that technology giants, including Apple, Meta, Microsoft, Google, Nvidia, Baidu, Byte Jump, Tencent, and other prominent domestic and international players, are at the fore of shaping and advancing the industry.

China is still in the race for the ‘crypto crown'

Beijing posited that though the United States spearheads the development of Web3, Europe places significant emphasis on privacy protection, while Japan and South Korea strive to establish themselves as industry leaders. On the domestic front, Chinese local governments are engaged in planning and development efforts.

More than 30 provinces and cities have issued support policies, with particular enthusiasm seen in Beijing, Shanghai, Guangzhou, Hangzhou, and among others. A return of favorable legislation supported by funds injected by wealthy mainland Chinese investors could propel it to the top spot for crypto companies, which could, in turn, prove bullish for crypto markets.

This week, the WSJ reported that China makes up the largest market to Binance, the world's leading exchange, despite crypto activity being outlawed in the country.

Sam is a financial content specialist with a keen interest in the blockchain space. He has worked with several firms and media outlets in the Finance and Cybersecurity fields.