5Jun 2023

MICA (EU Regulation) & Hong Kong

by David Angliss

Hong Kong To Allow Retail Trading of Crypto Assets


Hong Kong is pivoting toward becoming a crypto asset hub by making a series of moves to become more crypto-friendly, including trailing CBDC and allowing crypto trading for the second half of 2023. Trading of crypto assets has been reserved for institutions since 2018. Trading of crypto assets has been reserved for institutions since 2018. Hong Kong’s decision to embrace crypto assets demonstrates its willingness to adapt to emerging technologies and attract businesses and investments in the crypto sector.

This move by Hong Kong has also seen mainland Chinese companies become eager to enter the Hong Kong market due to China’s current ban on crypto-related services. Over 80 Chinese companies have expressed interest in obtaining a licence issued by the Securities and Futures Commission of Hong Kong.

Hong Kong’s reputation in the crypto industry has evolved, transitioning from being tough on cryptocurrencies to actively promoting virtual currencies. The city’s approach includes comprehensive regulations to manage risks while fostering innovation and investor confidence. This shift in policy is seen as a boost of investor confidence in the crypto industry, particularly since it comes from an international finance hub like Hong Kong.


Markets in Crypto-Assets (MiCA) Bill


European Union (EU) officials have recently officially signed the Markets in Crypto-Assets (MiCA) bill into law, marking a significant milestone in establishing a comprehensive regulatory framework for the crypto industry.

MiCA aims to create a consistent and harmonised regulatory framework for crypto assets across the EU member states. Its implementation is expected to bring greater clarity, transparency, and legal certainty to the rapidly evolving crypto industry. 


What is included in the MiCA Bill?


MiCA provides a regulatory framework for digital assets that use decentralised ledger technology (DLT). The main crypto assets covered by MiCA are:

  1. Asset-referenced tokens (ARTs), which are crypto assets that maintain a stable value by referring to the value of non-cash assets or a basket of currencies; 
  2. Electronic money tokens (EMT), which are crypto assets that purport to maintain a stable value by referring to the value of a single fiat currency that is legal tender; and
  3. Non ART or EMT crypto assets, which are crypto assets that are intended to provide digital access to a good or service and are only accepted by the issuer of that token, such as ‘Utility Tokens’.

Despite making strides towards providing a clear regulatory environment in the European region, MiCA fails to address certain paradigms in the crypto asset industry such as Decentralised Finance (DeFi), Security Tokens and Non-Fungible Tokens (NFTs). These certain components are left out because they either already have their own regulation in accordance with their nature, or they have such specific features that legislators need to carry out further analysis to configure a suitable regulatory framework.

David Angliss

David is an analyst at Apollo Crypto with five years of crypto-asset investing experience. He contributes to the investment team by researching crypto-assets across the innovative contract platform, DeFi assets and NFT and Metaverse infrastructure categories. David also assists with the day-to-day activities of market-neutral strategies by analysing yields, evaluating smart audits, and facilitating crypto-asset transactions.