The Development and Regulation of Cryptoassets: Hong Kong Experiences and a Comparative Analysis

28 Pages Posted: 19 Mar 2020 Last revised: 22 Jun 2020

See all articles by (Robin) Hui Huang

(Robin) Hui Huang

Chinese University of Hong Kong - Faculty of Law; 华东政法大学(East China University of Political Sicence and Law); University of New South Wales - Faculty of Law

Demin Yang

School of Law, Jiangxi University of Finance and Economics

Ferdinand Fai Yang Loo

Faculty of Law, The Chinese University of Hong Kong

Date Written: February 26, 2020

Abstract

Cryptoassets have emerged as a new category of financial products in recent years and have attracted a great deal of attention from market participants and regulators. While the characteristics of cryptoassets, such as anonymity and disintermediation in transactions, bring significant benefits, they come with a range of significant risks concerning investor protection and market integrity. Due to the difficulties in regulating cryptoassets under the traditional framework, Hong Kong has set up its first comprehensive regulatory regime on cryptoassets in November 2018, imposing new standards on cryptoasset fund managers, distributors and platform operators. By means of a comparison with four major jurisdictions overseas, including Mainland China, the US, the UK, and Singapore, the strengths and potential concerns of Hong Kong’s new regime are analysed. Overall, the new regulatory regime for cryptoassets in Hong Kong is a significant development, addressing the issues of regulatory gaps and regulatory arbitrage that existed under the previous framework as well as introducing enhanced regulatory standards. This has the effect of improving investor protection, but there are some remaining concerns. Chief amongst them are the problems with regulatory scope, the application of traditional regulatory standards to cryptoassets that do not fall within the definition of securities or futures, problems with the sandbox mechanism, and ultimately as a matter of regulatory philosophy, the need for a better balance between investor protection and market development.

Keywords: Cryptoassets, Fintech, Blockchain, Financial innovation, Investor protection, Hong Kong

JEL Classification: G32, K22

Suggested Citation

Huang, (Robin) Hui and Yang, Demin and Loo, Ferdinand Fai Yang, The Development and Regulation of Cryptoassets: Hong Kong Experiences and a Comparative Analysis (February 26, 2020). European Business Organization Law Review (2020), The Chinese University of Hong Kong Faculty of Law Research Paper No. 2020-12, Available at SSRN: https://ssrn.com/abstract=3544034 or http://dx.doi.org/10.2139/ssrn.3544034

(Robin) Hui Huang (Contact Author)

Chinese University of Hong Kong - Faculty of Law ( email )

Shatin, New Territories
Hong Kong
852-39431805 (Phone)
852-29942505 (Fax)

HOME PAGE: http://www.law.cuhk.edu.hk/people/huang-hui-robin.php

华东政法大学(East China University of Political Sicence and Law) ( email )

1575 Wanhangdu Rd.
Changning, Shanghai 200042
China

University of New South Wales - Faculty of Law ( email )

Sydney, New South Wales 2052
Australia
61-2-9385 9649 (Phone)
61-2-9385 1175 (Fax)

Demin Yang

School of Law, Jiangxi University of Finance and Economics ( email )

China

Ferdinand Fai Yang Loo

Faculty of Law, The Chinese University of Hong Kong ( email )

Hong Kong

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