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Hong Kong said that it would adopt a welcoming approach to digital assets on Monday as it seeks to regain its status as a global cryptocurrency hub, but the message received a mixed reaction from industry players, including billionaire Sam Bankman-Fried.

Speaking via a video call at the Hong Kong Fintech Week conference, the founder and CEO of crypto derivatives exchange FTX said the city could still reclaim its crypto crown even though jurisdictions like the Bahamas and Dubai are already adopting regulations to become more crypto-friendly.

Bankman-Fried pointed to Hong Kong, Singapore and Busan in Korea as the places in Asia that still have the potential to become hubs in Asia. On Monday, he tweeted:

That’s because Bankman-Fried moved FTX from Hong Kong to the Bahamas last year, citing the city’s lack of regulatory clarity and stringent Covid restrictions.

The Hong Kong government said the city is “open and inclusive” toward virtual asset-related businesses. Local financial regulator proposed to allow retail investors to trade in cryptocurrencies and crypto exchange-traded products. It will start a public consultation on giving retail investors “a suitable degree of access” to virtual assets under the upcoming mandatory licensing regime for crypto exchanges.

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The announcement marks a shift from officials’ previous stance to limit such activities to professional investors. Back in 2018, Hong Kong introduced a voluntary licensing regime for crypto platforms that restrict them to only service individuals with a portfolio of at least HK$8 million ($1 million) in liquid assets. The city is making the licensing requirement mandatory starting March next year.

Bankman Fried, however, argued strongly that a regulatory regime which restricts access to crypto products based on wealth is ill conceived and fails to serve its intended purpose. “I think wealth-based tests are [expletive], I think they’re really bad. I mean, bad for the world,” he said.

He called them “deeply classist” because the crypto markets would be reserved solely for the rich. “Who do you think is going to be able to grow their wealth in a system where you put a wealth-based test [on it]…It’s going to have all the discrimination that you would expect it to have,” Bankman-Fried said. Instead, he believes access should be granted to investors based on their knowledge of both the products and their inherent risks.

The government said it will also review property rights for tokenized assets and the legality of smart contracts. Tokenized assets are digital tokens on a blockchain that represent the ownership of assets, such as real estate or bonds. Meanwhile, smart contracts are computer programs running on a blockchain that self-execute when certain conditions are met.

Adrian Cheng, CEO of Hong Kong real estate giant New World Development, said Hong Kong is “back into the game” with its ambitions outlined to become the international digital asset center. “We believe recent progressive policies not only have laid a solid regulatory foundation in Hong Kong, but also propelled the birth of a world leading digital issuance hub of global securities, which is unprecedented in other countries,” said Cheng, the son of Hong Kong billionaire Henry Cheng, at the conference.

Leonhard Weese, cofounder of the Bitcoin Association of Hong Kong, however, thinks that the government still offers little clarity about its crypto regulatory framework. He said he was surprised by the fact that authorities only announced a public consultation on retail crypto trading rather than an actual change of policy. “This regulatory certainty is not being introduced now by slightly altering these announcements,” said Weese. “The law, as it is proposed, is likely going to pass and it is going to be interpreted as excluding retail access.”

But Michel Lee, executive president of Hashkey Group, remains optimistic that Hong Kong will move forward to allow retail participation. Hashkey Group is one of the two crypto firms that have already received a greenlight from the city’s regulators under the current voluntary licensing regime.

“Hong Kong investors are the most sophisticated globally. Many retail investors would already have had some holdings in digital assets. I think it’s irresponsible and illogical for the government to say, ‘hey, now you can’t even trade them,’” said Lee. “I think it’s a case of making sure investors can trade safely. So I can totally see this being a very obvious thing that definitely should happen.”

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