Key Takeaways
- The city-state has established itself as a premier destination for digital asset companies with its supportive regulatory environment. This has placed Singapore above Hong Kong, which is another city aiming to be a global crypto hub.
- In 2024, Singapore granted operational licenses to 14 crypto companies, including leading exchanges and crypto venture capitalists. Meanwhile, Hong Kong has only greenlit half that number.
- Hong Kong being a special administrative state of China, is subject to Beijing’s oversight. China has a complete ban on crypto-related activities, but the city-state has been given the leniency to explore the sector, as it is a leading global financial hub.
- Crypto firms have lauded Singapore’s approach of allowing both small-scale and large-scale investors to take part in the market. Whereas in Hong Kong, only established financial institutions are allowed to utilize crypto assets and blockchain technology.
Singapore has emerged as a strong contender in the race to establish itself as the global digital assets hub, far outpacing its financial centre rival Hong Kong, which has struggled to gain traction in the crypto sector.
Singapore Pips Hong Kong To Become Asia’s Crypto Hub
In 2024, Singapore granted cryptocurrency licenses to 13 companies, which is more than double the amount issued the previous year. This reflects the city-state’s commitment to fostering a dynamic digital economy. These licenses were provided to a wide range of crypto service providers, including Upbit, OKX, BitGo, GSR, and Anchorage.
While Hong Kong has a similar licensing regime, it has been slow to catch up to Singapore. Both city-states are competing to attract digital asset firms to their shores with dedicated regimes, tokenization projects, and regulatory sandboxes. The local government views the crypto market as an opportunity to boost the allure of their respective jurisdictions as global business hubs.
However, Hong Kong’s progress in this regard has been sluggish. Despite regulators indicating their intent to accelerate approvals, the city has only issued seven full licenses to crypto firms in 2024. Four out of these companies were greenlit on December 18 with certain restrictions, while an additional seven firms currently hold provisional licenses. Leading cryptocurrency exchanges Bybit and OKX have withdrawn their applications for Hong Kong licenses, citing challenges within Hong Kong’s regulatory regime.
Hong Kong’s Crypto Standards Are “Too High” For Businesses To Be Profitable
One hurdle to the city’s crypto economy is that it only allows trading in the most liquid crypto assets, such as Bitcoin (BTC) and Ether (ETH), blocking investors from betting on smaller and more volatile cryptocurrencies, otherwise known as altcoins.
Roger Li, the co-founder of One Satoshi, said that the city’s standards are too high to remain profitable. One Satoshi is a Hong Kong-based store chain offering over-the-counter conversions between cash and crypto.
Another major catalyst deterring digital asset companies from investing in Hong Kong is the influence of China over the city-state. Beijing has imposed a complete ban on all cryptocurrency-related transactions and activities. Hong Kong, a special administrative state of China, has a different risk profile compared to other Asian countries.
On the contrary, Singapore’s more accommodative digital asset environment makes it a safe and long-term choice for investors to consider it as a regional hub. The nation offers more regulatory clarity and supportive policies by adopting a risk-adjusted approach.
Nevertheless, both major cities can boast about their progress in getting regulated financial institutions to experiment with blockchain technology and tokenized assets.
Last month, the Monetary Authority of Singapore announced plans to support the commercialization of asset tokenization through two state-backed initiatives – Project Guardian and Global Layer 1. Meanwhile, Hong Kong recently oversaw a $770 million sale of digital green bonds on HSBC Holdings’ tokenization platform.
Hong Kong also became the second country after the U.S. to approve spot Bitcoin exchange-traded funds (ETFs) in April 2024. However, the crypto investment products have failed to garner the kind of demand and enthusiasm buyers had for equivalent funds in the West. The city’s crypto ETFs combined have about $500 million in assets under management (AUM), which is a fraction of the more than $120 billion in AUM held by issuers in the U.S.
Ben Charoenwong, associate professor of finance at INSEAD, stated that Singapore’s crypto framework encourages “interaction” with new entrants and established institutions. Meanwhile, in Hong Kong, the focus is solely on established financial institutions, thereby creating fewer opportunities for new entrants, and limiting the scope of innovation in the crypto space.
