Crypto Investment | What’s Behind Hong Kong’s Approach To Crypto? Kaiko Dives In

What’s Behind Hong Kong’s Approach To Crypto? Kaiko Dives In

Hong Kong’s Securities and Futures Commission (SFC) has taken a new approach to the crypto industry. This new way to regulate the nascent sector could benefit the crypto market and bring a new wave of capital to the largest digital assets in the ecosystem. 

On Monday, Hong Kong made clear its intentions to open the door to crypto trading in the Asian region in what appears to be a completely different approach to the enforcement actions taken by the U.S. Securities and Exchange Commission (SEC). 

Digital asset market data provider Kaiko weighed in on the matter in a recent blog post, suggesting that Asia appears to be positioning itself at the forefront of the next digital asset revolution by welcoming crypto business. Kaiko Research Analyst Conor Ryder said:

An enticing East could well be the next catalyst that propels crypto prices upwards, with some proclaiming that this run has already started, propelled by an Asian-linked token rally.

Why The Sudden Crypto-Friendly Policy From Hong Kong?

Why, after a tumultuous year, low prices, and debacles from exchanges and firms like FTX, are Hong Kong and possibly other jurisdictions loosening the regulatory policies in the region? Kaiko analyst Conor Ryder suggests that given the “carpet bomb” from the SEC, now is the perfect time for Hong Kong to strike.

Monthly trading volume since. 2020 Source: Kaiko

The influx of new capital into Hong Kong and Asia could mean economic growth for the region and Asian exchanges. Data compiled by Kaiko shows that Asian exchanges benefited the most from the 2021 bull run. Still, since China outlawed digital assets at the end of 2021, Asia has significantly lagged behind other regions when looking at Binance’s trading volumes.

According to the SFC’s proposal, they will allow trading in the “largest cap virtual assets” included in at least two approved indices.

Eligible crypto assets that meet the criteria of the SFC. Source: tier10k on Twitter

The perpetual futures markets reacted positively to the realization that the listed tokens could see renewed flows from Asia, with open interest in Bitcoin Cash, Litecoin, and Polkadot rising 15% last week, according to Kaiko Research. Funding rates also moved positively and have mostly held up since the announcement.

Perpetual Futures open interest and funding rates. Source: Kaiko

The announcement of a new regulatory approach from Hong Kong, with alleged support from China, could be seen as positive for crypto in the long term. In the meantime, the market is still deciding which way prices will go, for a continuation of the crypto winter or a new bull market. Conor Ryder concluded:

The timing of the announcement, while the SEC cracks down on crypto, looks intentional and may actually drive crypto business out of the US and towards Asia over time.

The total market cap has declined, shown on the daily chart. Source: TOTAL TradingView.

The total market capitalization as of this writing is $1.02 trillion, representing a decrease of -3.13% in the last 24 hours. Bitcoin’s market cap is $449 billion, with a 40.33% dominance.

Stablecoin’s market cap is at $137 billion and has a 12.29% share of the total market cap, according to CoinGecko data.

Featured image from Unsplash, chart from TradingView.

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