Hong Kong Bitcoin Mining Suffers A Setback Due To ‘Trade Descriptions Ordinance’ Restrictions


Bitcoin Mining Takes A Blow As Hong Kong Announces New Restrictions On Mining – Does This Spell Out A Change In Attitude Towards Cryptocurrencies?

Over the beginning of this month, the Hong Kong Secretary responsible for Financial Services as well as the Treasury, James Lau made the Legislative Council that, according to regulations set out under the conduct of the Trade Descriptions Ordinance – that any purchase of mining equipment comes under its jurisdiction.

This recent announcement means that cryptocurrency mining hardware will face increasingly stringent legal restrictions, especially on hardware that is used for the mining of currencies like Bitcoin. With this recent move by the government of Hong Kong, does this represent a drastic change in approach towards cryptocurrencies and mining with the authorities of Hong Kong?

The Changing Crypto Landscape Of Hong Kong

For a long time, Hong Kong has been serving as a major hub for the disruptive fields like Fintech, while also proving to be a powerful market within the world of blockchain, hosting a range of companies including Ripple. Operating as a Special Administrative Region also means that it has a range of benefits, including being relatively exempt from mainland rules of the People's Republic of China. This is well demonstrated with its pretty relaxed and open approach towards cryptocurrencies.

For the moment in time, Hong Kong has no statutory instruments or requirements for crypto exchanges or its individual users to be regulated to any extent. But with the recent news that mining hardware has come under a certain jurisdiction, legislators in Hong Kong are moving towards a firmer approach, it seems.

With cryptocurrencies steadily growing in popularity over these past few years, the level of concern expressed by institutions ranging from the financial to the governmental has increased over time too, getting to the point where regulators are looking for just how much regulation should be related to the industry.

Over November 2018, for example, Hong Kong's Securities and Futures Commission disclosed its new proposals for a crypto-facing regulatory structure, with a special emphasis on cryptocurrency exchanges. More specifically, however, the SFC underlined a dedicated regulatory route for cryptocurrency exchanges.

While the SFC is, for the moment, delving into such an idea in a more exploratory format for the time being, it is hoped that this will result in a practical system for the foreseeable future. While this may be a cause for concern for some exchanges out there, according to the CEO of the SFC, Ashley Alder, outlined the ideal ‘opt-in' system that it would create.

“Those exchanges that want to be regulated by us will be set apart from those that don’t. This is essentially an opt-in approach for exchanges and platform operators, and they will first explore the conceptual framework with us in a strict sandbox environment.”

Through a system such as this, cryptocurrency exchanges that opt into this will be required to deal with institutional investors only, with no other entities. This is one of the ways in which the SFC believes it can safeguard these exchanges from unscrupulous elements within the ecosystem.

For the time being, however, this entire framework remains one in a purely hypothetical form, with no clear timetable on any activity so far.

For the moment, news outlets on social media have come to refer to this regulatory system as a ‘sandbox' regime for crypto exchanges in Hong Kong.

SharkCIA News (@SharkCIANews) reports the following along with its sourcing of Reuters:

“Hong Kong's Securities & Futures Commission will propose a regulatory regime known as a ‘sandbox' for crypto exchanges in the Asian financial hub.” – November 4th, 2018

Cryptocurrency Exchange Regulation – The General Response

With the emerging fact that the cryptocurrency market is maturing, this is a move that appears to be par for the course for companies. With a steadily moving body of regulation ahead of market maturing, this is going a long way to demonstrating that cryptocurrencies are becoming steadily more recognized as a legitimate kind of asset class.

There are those out there, however, that believe the introduction of this ‘sandbox' system from Hong Kong is taking things an unreasonable step too far. Among those people is the President of the Bitcoin Association of Hong Kong – Leo Weese. Weese believes that this sweeping set of regulatory recommendations are completely unnecessary, and will result in a general wave of exchanges moving out of the city.

During an interview with the South China Morning Post – Weese argued that:

“While Hong Kong was a better place when it did not bother such platforms, it was inevitable this day would come. Exchanges will likely maintain parts of their teams in Hong Kong, but work harder to convince the public of a new narrative that places them outside the SAR.”

Is Hong Kong's Regulatory Move A Demonstration That It's Following In The Footsteps Of China?

In more recent news, Bitmain, known as one of, if not the largest producer of cryptocurrency mining hardware in the world, has lapsed on its application to launch an IPO on the Hong Kong Stock Exchange. While the reasoning for this is not 100 percent clear, there are those that believe that this is due to the lower value of Bitcoin, which has put a financial dent in the company.

Others, on the other hand, believe that this is a broad demonstration that the climate in Hong Kong has become a few degrees frostier for cryptocurrency and blockchain companies now.

Heidi Hecht – @HeidiSHecht, for example, wrote the following:

In response to @Officialmcafee

“Re: Bitmain: One of the problems of being the ‘most hated' company is that people can theoretically choose to use other companies in the free market. I hear Bitmain canceled its IPO due to unimpressive financial reports.”

John McAfee, in his characteristic bombastic way, took the time to respond to this assumption of the condition of Bitmain:

@Officialmcafee

“Have you lost your mind??? Bitmain owns more Bitcoins than any other person, company or agency in the world and it's owned by the richest man in crypto. They made a billion dollars in profit last year alone. Jihan simply changed his mind about the Hong Kong exchange.”

What this debate demonstrates is two parts of a whole truth. The underlying reason for Bitmain's inability to file an IPO on the Hong Kong Stock exchange is due to the regulations in place for financial forecasting meant that the company was unable to get listed.

Specifically, regulations mean that the latest financial period of any company cannot have ended more than six months from the date that the company sought to be listed. According to sources, Bitmain's financial forecast covered the period which ended on June 30th, 2018, approximately 9 months out from its listing.

The cancellation, therefore, is not due to its financial forecasts, which were impressive all the same, but because its timing was off. It remains to be seen whether or not Jihan ‘simply changed his mind' about getting an IPO listed, however.

While regulation is an unfortunate necessity for a broader inclusion of institutional investment within the cryptocurrency world, as it ascertains their protection and consequent confidence. Are the kinds of proposals and regulations placed upon cryptocurrency exchanges, as well as mining equipment within the region going too far beyond the mark of crypto market conducive to growth? Or will this prove to be the exit point for companies?

Among countries situated in South East Asia, Hong Kong has the time-honored tradition of being home to the freest economy in the world. According to both the Index of Economic Freedom and Freedom House, Hong Kong comes up as the first rank in terms of its approach towards global trade and investment, taxation, government intervention, and other facets. The only rival that it has on the horizon is Singapore in second place.

While this is the case for mainstream business in this small nation, one has to ask why cryptocurrencies and blockchain are not afforded this same level of freedom.

https://bitcoinexchangeguide.com/bitcoin-btc-ethereum-eth-and-ripple-xrp-analysis-todays-top-crypto-price-predictions/

Get Daily Headlines

Enter Best Email to Get Trending Crypto News & Bitcoin Market Updates

What to Know More?

Join Our Telegram Group to Receive Live Updates on The Latest Blockchain & Crypto News From Your Favorite Projects

Join Our Telegram

Stay Up to Date!

Join us on Twitter to Get The Latest Trading Signals, Blockchain News, and Daily Communication with Crypto Users!

Join Our Twitter

Add comment

E-mail is already registered on the site. Please use the Login form or enter another.

You entered an incorrect username or password

Sorry, you must be logged in to post a comment.
Bitcoin Exchange Guide