Hong Kong Regulation Could Have Ripple Effects Throughout the Crypto Industry

Many people don’t realize the role Hong Kong plays in the global cryptocurrency space. Hong Kong is home to some of the largest enterprises and dominates the growing futures market. Earlier this month the Hong Kong Securities and Futures Commission (SFC) released a proposal stating that regulation was no longer optional, but mandatory. If passed into law, enterprises who continue to operate without a license could see their executives face imprisonment.

The impact of eliminating unregulated platforms in Hong Kong could be far-reaching.

Below we take a look at which digital asset companies are based in Hong Kong or have a major operational presence. This includes major trading venues like BitMEX and FTX which are headquartered in Hong Kong and others like Huobi, OKEx, and Bybit that have offices in the region.

Most notably, Hong Kong is dominant in the crypto futures market touching 72% of ETH and 57% of BTC futures. Total ETH and BTC futures volumes are $5 billion and $18 billion a day.

When BitMEX faced charges last month, data provided by Skew showed open positions in Bitcoin perpetual futures fell -22% and that of ETH dropped by -37%. Data from Glassnode also showed BitMEX deposits fell -25%. Below, we discuss what the regulation is, why it happened, what it takes to get a license, and what all the unregulated companies can do.