KEY POINTS
- Hong Kong's clearer regulations place it above the US in crypto policies
- The Chinese special administrative region also plans to exempt taxes on crypto investment gains
- Trump's unpredictability may affect his country's road toward leading the world in crypto
- Hong Kong's cohesive framework allows for smoother operations for crypto firms: WOW Summit Global CEO
- China may soon move since 'no one wants to lose in this game': Ivan Ivanov
Ever since Donald Trump was elected to be the next president of the United States, there have been talks about which country will lead as the world's cryptocurrency hub. He promised to make crypto great again by leading the rest of the world in blockchain and digital asset innovation, but rising to the challenge is an emerging major player in technology: Hong Kong.
The U.S., under its new president, is expected to put up a fight in the global race toward leading the rest of the world in crypto dominance, but is it a little bit too late?
In an exclusive with International Business Times, Ivan Ivanov, the Global CEO of WOW (World of Web3) Summit, a global event that brings together the most prominent figures, investors, and key players in the industry, talked about renewed confidence in the U.S. as a likely crypto hub and Hong Kong's bid to position itself as a serious challenger in the global crypto leadership competition.
Trump's Unpredictability Brings to Question His Administration's Crypto Vision
During the recently concluded Belt and Road Forum, Joseph Chan, chair of the Silk Road Economic Development Research Center, noted how Hong Kong has a clear advantage over the U.S. in terms of crypto goals.
"Trump is unpredictable; you never know when he may change his mind," Chan pointed out. Chan's comments come from his observations of the crypto space over the years, and he is also a moderator of a Belt and Road panel focused on Web3 and the new digital economy.
He went on to note that Hong Kong's crypto regulations are more consistent at this point. On the other hand, he also didn't underestimate the possibility that Trump's entry into the White House can give the U.S. the upper hand within the next three years.
For Ivanov, Chan made a good point. "Trump is unpredictable, and we'll only see the real situation once he's in power," he said. Ivanov does believe that regardless of the incoming U.S. president's unpredictable nature, his election will be beneficial for the broader crypto industry, considering how Bitcoin and the broader crypto market surged after the elections.
Why Hong Kong Is in Strong Contender Position
Hong Kong, unlike the U.S., which is only starting to open up to crypto, has already been making significant strides in crypto policy over the last few years.
For instance, the Chinese special administrative region officially opened crypto trading to retail last year, with HashKey Exchange and OSL Digital Securities becoming the first crypto exchanges to receive licenses.
It has also been fast-tracking crypto licensing and approved four more crypto exchanges last week, allowing healthier competition in the local market.
Ivanov noted that Hong Kong's crypto landscape has multifaceted advantages. "Primarily, these advantages are anchored in Hong Kong's regulatory clarity, geographical positioning, and recent market developments. The government has established a supportive regulatory framework for cryptocurrencies, which has fostered a sense of confidence among crypto businesses," he said.
He explained that in the city, many operators feel assured to go about with their business due to the clear guidelines set forth by the Securities and Futures Commission (SFC) that not only focus on investor protection but also on tech innovation.
Hong Kong's transparent and clear rules on crypto business operation has positioned it as an attractive destination for investments, as evidenced by a significant spike in venture capital flowing into blockchain startups, Ivanov added.
Aside from clear regulations, there's also Hong Kong's geographical location. Lying between East and West, the region is a critical gateway for both Asian markets and Western investors. "This unique position enhances its appeal as an investment hub, particularly for those looking to tap into the burgeoning digital asset sector," Ivanov said.
Finally, spot Bitcoin exchange-traded funds (ETFs) played a major role in putting Hong Kong in the spotlight. There has been considerable interest in crypto among local institutions since BTC ETFs were launched.
Hong Kong vs USA in Crypto Regulation
The United States' crypto regulations have long been in question, especially under the Biden administration as U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler pushed a crackdown on the industry.
There are reports Trump is looking to authorize the Commodity Futures Trading Commission (CFTC) to lead in regulating crypto instead of the SEC, but even if the CFTC gets more authority, the damage has been done.
Also, the existing regulations in the U.S. have repeatedly been called out by top crypto players for being incompatible with blockchain and digital assets.
"In contrast to the fragmented regulatory landscape in the United States, where numerous agencies oversee crypto activities, Hong Kong's cohesive framework allows for smoother operations," Ivanov pointed out.
Aside from the CFTC and SEC battling for who should really be regulating crypto assets, there are also separate regulators in some states, such as The New York State Department of Financial Services (NYDFS) agency.
Also licensing is an issue in the U.S., in contrast to Hong Kong. Notably, many U.S.-based firms have often cited regulatory uncertainty as a major hurdle in their operations.
Hong Kong's Tax Exemption May Lead to Major Shift
Late last month, Hong Kong unveiled plans to waive tax on investment gains from crypto and other similar assets for hedge funds, private equity funds and select family offices.
Ivanov said the exemption could mark a significant shift in the local digital asset space. He expects more retail investors into the space and projects a massive boost in trading volumes.
"By eliminating capital gains tax on cryptocurrency profits, Hong Kong would position itself as one of the most favorable jurisdictions in Asia for crypto investments," he said.
WOW Summit's Role in HK's Crypto Evolution
Global events like WOW Summit and other blockchain or crypto-centric events play a critical role in fostering collaboration within Hong Kong's crypto space.
It has been facilitating dialogue between industry players and regulators aside from hosting one of the most prominent blockchain summits in the world.
Last year, it hosted panel discussions that brought together representatives from Hong Kong's SFC and leading blockchain firms, all with the mission of fostering engagement to help ensure that regulatory frameworks evolve alongside technological advancements.
It also acts as a Launchpad for emerging technologies. In 2023 alone, WOW Summit featured over a hundred startups, showcasing innovative solutions across various sectors, including decentralized finance (DeFi) and non-fungible tokens (NFTs), which attracted investor interest and media coverage.
Bangkok’s WOW Summit 2024 dazzled on Nov 11-12, uniting global leaders and innovators to spotlight web3’s bright future.🤩
— WOW Summit (@WOWsummitWorld) December 3, 2024
“This is the first time we host the event in Bangkok, and the first time we collaborate and co-host the event with so many partners”, — says Ivan Ivanov,… pic.twitter.com/Vvk76AJ7bq
So Which Country Has Potential to Become the Global Crypto Hub?
Both the U.S. and Hong Kong have immense potential to lead the world in crypto. However, at this point, Hong Kong's tax regime may have more cards to play than its western rival.
"The government's intention to exclude digital assets from taxation for family offices and institutions is a significant benefit, one that I don't think the U.S. will adopt anytime soon," said Ivanov.
He went on to note that he views Hong Kong as somewhat of a "sandbox" for mainland China. "Maybe we'll see some movements from the Chinese government soon. After all, no one wants to lose in this game," he said.
Bitcoin Magazine CEO David Bailey said last month that Chinese President Xi Jinping has changed his stance on Bitcoin, as affected by Trump's pivot toward the crypto industry.
It remains to be seen how crypto will evolve in the U.S., given Trump's promises to Bitcoin and the crypto industry. For now, Hong Kong is in a position to grab the lead spot in the world as it continues to gain attention worldwide, unless Trump sticks to his promise of making crypto great again, beginning at home.
