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Hong Kong’s Patient Approach to Regulating Crypto Will Pay Off: LegCo’s Duncan Chiu

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Crypto regulations are a competitive business in Asia, with places such as Hong Kong and Singapore vying to become Asia’s crypto hub and capture all the business associated with that status.

The challenge, though, lies in crafting a rulebook that balances investor protections with a welcomingness to businesses and new capital. And here, Hong Kong has an advantage over places like Japan or Korea, since its common-law framework for traditional finance has made its economy one of the most open and free in the world — a recent report from a Canadian think tank deemed Hong Kong the “freest economy” in the world, with Singapore just behind it in second place.

With crypto, however, Hong Kong has moved relatively slowly, especially compared to Singapore. But Duncan Chiu, a member of Hong Kong’s Legislative Council and chair of its Technology and Innovation committee, which oversees Hong Kong’s technology parks and research facilities, says the territory’s initial caution with respect to regulating crypto comes with advantages.

“Being a late mover is a good thing sometimes because you have a clear picture,” said Chiu in a recent interview with CoinDesk. For example, he pointed to how the Monetary Authority of Singapore (MAS), the city-state’s main financial regulator, has moved quickly to pass rules for crypto. MSA initially regulated crypto under its Payment Services Act, treating crypto inaccurately as a payment tool rather than an asset class. Japan did the same thing early on, forcing later revisions in 2024 as DeFi and tokenization eventually gained traction.

“While Hong Kong started late, the good thing is there were clearer patterns of how these products were being used,» said Chiu, who is one of the most prominent voices for crypto in Hong Kong, along with fellow LegCo member Johnny Ng. Chiu further pointed out how the original bitcoin white paper labeled the asset class as electronic cash, while the market reality is it’s become more of a commodity — a view shared by the U.S. Commodity and Futures Trading Commission — as another example of how market behavior around crypto has evolved and needed regulations to adapt.

Building regulatory alignment

One of the key issues Chiu said he’d like to work on in the LegCo is building a clear classification for different types of digital assets, such as cryptocurrencies vs. stablecoins, while also working with global regulators to ensure alignment among them.

“We need clear definitions and segmentation,” Chiu explained. “Some assets should be regulated like securities, while others should remain unregulated, like memecoins.”

According to Chiu, memecoins should be treated as collectibles, much like Pokémon cards or stamps.

«Memecoins don’t have functionality behind them — they don’t use smart contracts,” Chiu said. “They’re just collectible items, so I see no reason to regulate them like financial products.»

A dedicated crypto regulator?

Given how unique crypto is as an asset class, some jurisdictions, such as Dubai and its Virtual Assets Regulatory Authority (VARA), have created their own separate regulator for virtual assets.

When asked whether he felt Hong Kong should take the same path, Chiu recalled that in his early years in the LegCo, he had initially supported the creation of a digital version of the Securities and Futures Commission (SFC), the territory’s markets regulator, called the “eSFC.”

However, Hong Kong’s government has instead chosen to keep crypto oversight under existing financial regulators. The SFC has a dedicated digital asset team, while the Hong Kong Monetary Authority (HKMA) oversees stablecoins. Chiu said that for now, he’s satisfied with this arrangement, especially as the SFC expands its headcount even as the government calls for austerity elsewhere.

“The government’s intention is to keep everything under the SFC. They will have a team inside the SFC, and they’re hiring. We just approved that in LegCo,” Chiu noted.

LegCo’s crypto priorities

Chiu sees establishing OTC trading and custodian regulations as the next major priorities for the LegCo, while leaving building rules around crypto derivatives and leveraged trading to the SFC and crypto exchanges, rather than passing new laws.

Chiu considers crypto regulation a top-five priority, the others mostly being around Hong Kong’s economic recovery and public safety issues. But he acknowledges that not all of his fellow LegCo members share this same urgency regarding crypto regulation, with some wanting to focus on building more stringent investor protection mechanisms first, in order to to avoid another FTX or JPEX, both of whose failures left many in Hong Kong — and around Asia — with a big hole in their digital wallets

However, there’s only so much legislative bandwidth available. Hong Kong’s job market is weak, and the real estate sector is on the precipice of a painful correction. Hong Kong is also caught between the U.S. and Mainland China in Donald Trump’s next trade war, making an economic recovery challenging for the territory.

“Some LegCo members are big supporters of virtual assets, but not all, of course,” Chiu said. «They all have different priorities.»

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Coinbase Outpaces S&P 500 With 43% June Rise as Stablecoin Narrative Grows: CNBC

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Shares of Nasdaq-listed cryptocurrency exchange Coinbase (COIN) rose 43% this month, making the firm the top performer in the S&P 500 since it joined the index at the end of last month.

June’s run is already the stock’s best since November and caps three straight monthly gains. Coinbase’s shares reached their highest level since their public debut.

COIN hit a $382 high this week before enduring a slight correction, ending the week at $353 and seeing a slight 0.7% drop in after-hours trading to $351.

The wider S&P 500 index rose roughly 5% in June as geopolitical tensions eased.

Washington’s progress on the GENIUS Act, Congress’s first rulebook for dollar-pegged stablecoins, helped shift investor focus from trading fees to stablecoin revenue.

The bill brightened the outlook for Circle, whose shares hit a record high and saw its market cap near that of Coinbase this week.

Coinbase keeps all yield on USDC balances held on its platform and nearly half of other USDC income, equal to about 99 percent of Circle’s revenue, giving shareholders indirect exposure at no added cost, CNBC reported Friday, citing analysts including Citizens’ head of financial technology research Devin Ryan.

Trading, however, remains subdued. Average daily volume on Coinbase has drifted lower since April.

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Robinhood Launches Micro Bitcoin, Solana and XRP Futures Contracts

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Robinhood (HOOD) has introduced micro futures on bitcoin (BTC), solana (SOL) and XRP in the United States., expanding its existing crypto futures offering for its nearly 26 million funded accounts.

Micro contracts need far less collateral than full-size futures, letting traders take directional positions while committing a smaller slice of capital.

The contracts offer traders more flexibility to bet on a cryptocurrency’s future price direction or hedge current positions given their smaller size.

The launch rounds out a futures suite that began with BTC and ETH in January. It also comes weeks after the firm closed its $200 million purchase of Bitstamp and finalized a $179 million deal for Canada’s WonderFi.

Robinhood’s data shows that crypto notional volumes have exploded upward over time, reaching $11.7 billion in May. The figure marks a 36% rise month-over-month, and a 65% growth year-over-year.

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Why is XRP Up Today? Trio of Catalysts Sees Token Outperform Wider Crypto Market

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XRP climbed 5.5% to $2.19 in the last 24 hours after a trio of catalysts converged to help the cryptocurrency outperform the wider cryptocurrency market.

One of the catalysts was launch of XRP micro futures on Robinhood. The contracts offer traders more flexibility to bet on the cryptocurrency’s future price direction or hedge current positions given their smaller size.

Regulatory fog also thinned. On Friday, Ripple withdrew its cross-appeal in its long-running U.S. Securities and Exchange Commission (SEC) lawsuit. The SEC sued Ripple back in 2020 over its XRP sales, alleging these violated securities laws. The SEC is expected to drop its own appeal, leaving last year’s ruling, ordering Ripple to pay a $125 million civil penalty to the SEC, intact. The move could lift a lid that had kept some investors on the sidelines.

On-chain data rounded out the bullish setup. The XRP Ledger logged over a 1.1 million active addresses over the past week according to crypto analyst Ali Martinez, who cited Glassnode data.

XRP’s rise saw it outperform the wider crypto market, with the broader CoinDesk 20 (CD20) index rising 1.7% in the last 24 hours.

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