What New York can learn from Hong Kong about crypto asset regulation | CoinDesk JAPAN | Coin Desk Japan

Web3 companies are leaving New York. It’s because of the belligerent approach that US politics has taken recently to regulate the Web3 industry. Regulators’ disregard for the wishes of New York’s leaders has reduced New York’s global importance compared to other major financial hubs. But China and Hong Kong are teaching us that we can change the status quo.

Over the past 100 days, China and the United States have taken different regulatory paths. After a year and a half of hostilities, China appears to have turned and is rapidly implementing common-sense regulations in Hong Kong that encourage innovation and encourage industry growth. This all happened because Chinese government officials listened to and supported the people of Hong Kong and their leaders. But U.S. regulators seem intent on avoiding that route.

New York City Mayor Eric Adams showed a willingness to accept Web3 from the beginning, campaigned to promote crypto assets (virtual currency), and even received his first salary in Bitcoin. The democratically elected mayor has touted the benefits of crypto and has been actively involved with the crypto industry in planning for the city’s economic recovery, but Washington, D.C. bureaucrats oppose it. .

Today, in Washington, D.C., an unelected minority wields alarmingly authoritarian power as regulators, against New York’s apparent desire to move from its archaic financial system to a digital one. are exercising.

Hong Kong case

In the summer of 2021, the Chinese government will ban financial institutions and payment companies from providing services related to digital asset trading, and will ban cryptocurrency exchanges that operate domestically. targeted. Beijing’s central authorities have taken a heavy-handed approach to this emerging technology.

The Chinese government’s regulatory policies and the lack of clarity in Hong Kong’s securities regulator have resulted in many entrepreneurs, highly skilled developers, investors (with billions of dollars in capital), exchanges and countless others. industry active participants left China. These people moved to Hong Kong, Singapore, Dubai, Silicon Valley, etc.

Technological innovation and further development of the domestic capital market were decisively blocked. But what happened after that is pretty amazing. The Chinese authorities seem to have realized the ramifications of this disastrous turn and decided to make another dramatic turn in late 2022.

China’s dramatic policy shift

A former Chinese monetary policy official said last December that “banning crypto assets may be practical in the short term, but whether it is sustainable in the long term deserves detailed analysis.” and emphasized the need to build an appropriate regulatory framework for crypto-assets. Those of us in Beijing know that such public statements must be consistent with the views of the central government.

After seeing crypto-related exchanges, capital and a number of companies leave Hong Kong, the newly appointed Chief Executive, John Lee, has consulted with the Web3 industry to make Hong Kong gradually more global. created a plan to make it a cryptocurrency hub.

It has worked with Hong Kong’s financial regulators to secure Beijing’s support for Hong Kong’s ambitions. Such collaboration will provide clarity to broker-dealers, investors, and cryptocurrency exchanges, while ensuring a robust regulatory framework for Web3 that fully accommodates retail investor participation. It quickly led to approval.

To be clear, this decision is both a supportive move to spur economic recovery in Hong Kong, which has traditionally been the gateway to mainland China for global finance, and at the same time a geopolitical move by the Chinese government. There was also a movement. The new framework, which went into effect on June 1, also serves as a proving ground for future developments in regulation and innovation for the Web3 industry in other parts of China, highlighting Hong Kong’s speed of recovery.

New York getting worse

New YorkHong Kong can be a warning.American regulators are now taking a regulatory approach similar to that taken by China two years ago, and the Web3 industry Mayor Adams is trying to foster, including venture capital funding and projects, is already in Silicon Alley and It’s leaving the rest of America. Most alarmingly, even regulatory advocate Coinbase is considering moving overseas because of the current situation in the US. The Web3 industry moves fast.

As global financial hubs, Hong Kong and New York are places where the Web3 industry can naturally flourish. Fortunately for Hong Kong, the Chinese government is determined to support financial innovation. Unfortunately for New York and the rest of America, federal regulators have decided to put an end to financial innovation once and for all.

Chief Executive Lee and Mayor Adams will both take office in 2022. Despite Mayor Adams’ pleas to state and federal regulators to ease restrictive measures and bring clarity to the crypto industry, regulators are threatening Adams, New Yorkers, and crypto categorically rejected the wishes of the 50 million Americans who

And what is poignantly ironic to those who live in the “land of the free” is that today, the few unelected individuals with regulatory powers go to great lengths to stifle innovation. and use considerable public resources.

100 days of contrasts

Innovators, investors, and highly skilled developers are bogged down by the SEC’s enforcement-based regulation and its consistent claim that many cryptoassets are securities. ing.

The market capitalization of USD Coin (USDC) has decreased by nearly 50% from its peak 12 months ago to $27 billion (approximately ¥3.8 trillion, converted to ¥140 to the dollar). USD Coin is a stablecoin regulated in the United States, and some see its market capitalization as a market consensus indicating confidence in US regulation. So the cryptocurrency industry is rapidly leaving America.

As part of Hong Kong’s efforts to revive crypto assets, regulators have formulated a stablecoin issuance strategy and are moving towards a Hong Kong dollar-based stablecoin issuance. The development of CNH (offshore renminbi)-based stablecoins is also under discussion.

U.S. regulators forced crypto-friendly Signature Bank into bankruptcy in March despite its solvency. Former congressman and Signature Bank director Barney Frank has publicly said the bank was shut down because politically motivated U.S. authorities sent a strong anti-crypto message.

Shortly thereafter, China’s state-owned banks quickly seized the opportunity, and the Bank of China’s and Bank of Communications’ international arms moved to capture former customers of failed Silvergate Bank and signature banks in the Southeast Asian market.

The Hong Kong Monetary Authority has also officially put pressure on Hong Kong’s major banks, including Standard Chartered and HSBC, to accept crypto-related clients. The SEC also sued Coinbase, while Hong Kong politicians called on Coinbase to move to Hong Kong.

What it takes to innovate and grow

Through my experience as an investor in Web2 and Web3, and my decades of practice as a US securities attorney at leading international law firms in New York and China, I am an engineer to drive innovation and growth. We have seen that the rapid development of tolerant and smart laws by politicians is as essential as the rapid development of intelligent code by governments.

Unfortunately, the SEC has set “What is a security?” as the top regulatory issue in America. But really, the smart question to ask for smart legislation is: How can we foster innovation and economic growth? That’s the question Mayor Adams has been asking, and the question Chief Executive Lee asked.

Congressmen and New Yorkers alike risk suffering the same pain as China and Hong Kong if they do not embrace blockchain. Representatives in Congress this month introduced the SEC Stabilization Act to overhaul the SEC and remove Chairman Gary Gensler for a series of abuses of power.

If the chairman, who is not even elected, has gone in the opposite direction of the wishes of the elected mayors of America’s most populous cities and the tens of millions of American cryptocurrency users, If so, Mayor Adams and the New Yorkers should learn from Hong Kong’s experience and act now.

Because New Yorkers are rapidly losing the two things they love most: money and freedom.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
| Image: New York City Mayor Eric Adams (left) and Hong Kong Chief Executive John Lee (Creative Commons)
｜Original: What New York Can Learn From Hong Kong in Regulating Crypto