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Professor K. C. Chan, Secretary for Financial Services and the Treasury of the Hong Kong Special Administrative Region, believes that bitcoin regulation is not yet necessary in Hong Kong. The same opinion seems to prevail in mainland China.

 

Bitcoin was discussed at the meeting of the Legislative Council of Hong Kong, held yesterday, March 25th. According to the press release issued by the Hong Kong government, Hon. Leung Yiu-chung, a member of the Council, asked about the investigation into the MyCoin case and about the general attitude of the government towards cryptocurrencies: whether the authorities “will consider enacting legislation to regulate or ban the relevant activities; if they will, of the details; if not, the reasons for that?”

He was answered by Professor K. C. Chan, Secretary for Financial Services and the Treasury of Hong Kong, who told him that police are investigating the case, and six people aged between 34 and 55 have already been arrested. The total amount of money lost in the MyCoin scam is 180 million Hong Kong dollars (23 million USD).

As for bitcoins, their circulation in Hong Kong is very limited “as compared to other places”, so they do not pose a threat to Hong Kong’s financial system, said the official. Therefore,

“The Government does not consider it necessary to introduce at the moment new legislation to regulate trading in such virtual commodities or prohibit people from participating in such activities”.

The only bitcoin companies that are required to obtain licences are those that provide bitcoin/fiat exchange or remittance services. They are obliged to apply to the Commissioner of Customs and Excise for a "money service operator" licence.

All other bitcoin operators are free to continue their business as presently. Bitcoin should be considered a commodity, not a currency, says Chan, and “our existing laws provide for sanctions against unlawful acts, such as money laundering, terrorist financing, fraud, pyramid schemes and cyber-crimes, whether or not these virtual commodities are involved”. The police, according to him, will maintain online patrols for crime prevention and the government will “keep a close watch on the development of bitcoins and other virtual commodities” and cooperate with their counterparts in other parts of the world.

Citizens of Hong Kong are not discouraged from using bitcoins but they are reminded once again “to exercise extra caution and be risk-conscious… to avoid losses”.

According to the Chinese bitcoin exchange Huobi, a similar approach to cryptocurrencies has been adopted in mainland China. Leon Li, the CEO of Huobi, believes that “looking at the issue objectively, China actually has one of the more relaxed policies toward digital currency trading platforms”. Robert Kuhne, an analyst at Huobi, told Bitcorati that the Chinese government “neither endorses nor prohibits bitcoin”, only forbidding traditional banks and financial institutions to deal with it directly. The general tendency in China is “to be cautious and take a ‘wait and see’ approach”. The Chinese government may be conservative, “but at the same time they are prudent enough not to foolishly crush a potentially lucrative industry”.

Kuhne contrasts the Chinese attitude with Ben Lawsky’s BitLicense, which is, from his point of view, “an example of an oppressive regulatory regime that will stifle innovation and ensure that New York does not become a major bitcoin center”.

As CoinFox recently reported, the Russian Ministry of Finance hopes to ban bitcoin by 2016.

CoinFox closely monitored the MyCoin case: we wrote about the beginning of the case, the first clarifications by the police, the warning against bitcoin use issued by Hong Kong authorities, and the arrest of people accused of participating in the MyCoin scam.