Hong Kong has solidified its position as a leading contender in the race to become Asia's premier crypto hub, successfully launching the region's first-ever spot crypto ETFs on April 30. These ETFs, tracking Bitcoin and Ethereum, debuted with a remarkable first-day turnover exceeding $130 million. To gain deeper insights into the implications of this milestone and Hong Kong's evolving digital asset regulatory landscape, CryptoSlate spoke with HB Lim, Managing Director of APAC for BitGo.
Lim brings a wealth of regulatory and crypto industry experience to the conversation. Before joining BitGo, a leading institutional crypto custody provider, he was a director at Abu Dhabi Global Market, where he helped craft its progressive crypto regulatory frameworks. Lim previously held roles at the Monetary Authority of Singapore, overseeing market institutions.
In this exclusive interview, Lim shares his perspective on how Hong Kong's spot ETF offerings could influence market dynamics and investor sentiment in the region. He also assesses Hong Kong's overall digital asset regulatory stance and how it compares to other contenders vying to be Asia's crypto hub, such as Singapore and the UAE.
Lim provides candid insights into areas where Hong Kong's crypto regulations could be enhanced, such as creating licensing options for independent custodians and calibrating rules for institutional UNLISTED trading desks. He also discusses his outlook for digital assets in Hong Kong and APAC and BitGo's plans to support the region's growing ecosystem in the coming years.
With Hong Kong's spot ETFs launched on April 30, how do you foresee this impacting the region's crypto market mechanics and investor sentiment?
Currently, the primary markets for spot crypto ETFs are in North America and Europe. This means such ETFs are not available for trading during much of the Asia-Pacific trading hours, which is inconsistent with the 24/7 nature of the crypto market. Therefore, having spot crypto ETFs in Hong Kong provides investors with more convenient trading hours to access crypto.
Furthermore, some investors may prefer not to trade spot crypto ETFs listed in North America or Europe due to less favorable tax treatments or restrictions by their home country regulators. The Hong Kong spot crypto ETFs offer an additional option for such investors who may find Hong Kong provides more advantages regarding taxes and regulatory access.
The launch of spot crypto ETFs in Hong Kong will boost liquidity in its crypto markets and give rise to a growing local ecosystem of crypto exchanges, custodians, banks, brokers, and professional services.
Given your regulatory background, how do you evaluate Hong Kong's overall digital asset regulatory framework? Is it striking the right balance between innovation and investor protection?
Hong Kong has developed an extremely comprehensive and robust digital asset regulatory framework, which should be lauded. However, there are areas which could be enhanced, such as the need to create a regulatory framework for independent digital asset custodians to provide an additional option for custody, and calibrating Hong Kong’s proposed regulatory framework for the UNLISTED trading of digital assets.
Currently, digital asset exchanges in Hong Kong are only allowed to use digital asset custody services provided by a subsidiary company. Banks that wish to provide digital asset custody but outsource this function are only allowed to use services from a HK-licensed exchange or another HK-licensed bank. Exchanges and banks are currently not allowed to use specialized third-party independent custodians, which limits market options. There is also no licensing regime by the Hong Kong SFC or HKMA for independent digital asset custodians.
A thriving Web3 industry requires the support of specialized independent custodians. Digital asset wallets are the gateway to Web3, and proper custody and protection of digital assets is central to building trust in the industry. Hong Kong could benefit from developing a regulatory framework to license independent custodians, providing a complementary option for digital asset custody in the city.
On the UNLISTED trading front, Hong Kong has issued a consultation paper proposing to regulate UNLISTED trading. The proposals appear rather restrictive, suggesting that UNLISTED trading desks should only offer crypto-to-fiat pairs and limit the traded crypto to those approved for trading on licensed exchanges in Hong Kong. The proposals seem more targeted at brick-and-mortar shops serving retail customers and less suited to institutional UNLISTED trading desks that do not deal with retail clients and maintain robust compliance programs, including Know-Your-Customer checks. The UNLISTED trading proposals could benefit from a distinct regime for institutional desks that recognizes the lower risks they pose.
With Singapore and the UAE also vying to become Asia's premier crypto hub, how do you believe Hong Kong's spot ETF offerings will strengthen its competitive position?
Hong Kong offering spot crypto ETFs will likely attract more Web3 firms, investors, and talent to put down roots in the city, leading to a virtuous cycle of growth in its Web3 ecosystem.
What excites you most about the future of digital assets in Hong Kong and the APAC region, and how does BitGo plan to contribute to this evolution in the coming years?
Digital asset wallets are the gateway and foundation of Web3, and wallet and custody providers like BitGo are critical players in any Web3 ecosystem. BitGo has been active in the APAC region for years, and we remain bullish on Web3 adoption and growth in Hong Kong and the rest of APAC. As a company that places security and regulatory compliance first, we look forward to continuing to support the Web3 ecosystem in Hong Kong and the rest of APAC through our leading technology, and partnering with firms with our secure and trusted digital asset wallets and prime brokerage services.
Hobeng Lim, also known as HB Lim, is the Managing Director for the Asia-Pacific (APAC) region at BitGo, a leading provider of secure digital asset custody and financial services.
