Due to its non-interventionist economic policy, a free-market system, and low tax rates, Hong Kong is considered one of the most economically free jurisdictions in the world, making it a hotspot for the crypto-market.
Looking back to a statement made in 2015 by Hong Kong’s Secretary for Financial Services & Treasury, Prof. KC Chan said“Bitcoins are not widely circulated in Hong Kong… so there is no need to introduce legislation to regulate virtual commodity trading.”
This statement is a clear reflection of the liberal economic ethos that drives the Hong Kong economy, as well as its crypto market.
The growth and evolution of Hong Kong’s crypto market
Following the evolution and growth seen in the crypto market, the Hong Kong regulator is in the process of revising existing legislation for the regulation, licensing and definition of entities and activities in its blockchain and crypto market.
More specifically, the Hong Kong’s Securities and Futures Commission (SFC) released a regulatory framework for exchanges, as well as funds (like pension funds) in November of 2019. While this comes with some ambiguity as to which exchanges can be licensed, the type of license, what assets can be classified as securities, and several other complex details, overall the clarification of regulation of crypto activities in Hong Kong should be welcomed.
SFC’s framework: a shield for Hong Kong’s investors
If you study the SFC’s documents you will find that the rationale behind every legislation in the framework is to protect market participants, from the volatility risk of the market, as well as from bad actors operating in the market. So while this new development poses challenges for some virtual currency operators, it is worth noting that the investor’s security and interest is the main priority in this framework; for instance you will find in the document that Licensees must store 98% of client virtual assets in “cold wallets,” and that Licensees must have an insurance policy covering the risks associated with the custody of virtual assets held in both hot and cold storage.’
With this new development, it is safe to say that cryptocurrency investing is only getting safer and easier for investors in Hong Kong.
So how can you buy Bitcoin in Hong Kong?
This is basically paying for Bitcoin with HKD, either in the form of cash or via a debit or credit card at any Bitcoin ATM in the city. These transactions are quite expensive, with transactions charged with as much as 7% of the total amount. Presently there are about 31 Bitcoin ATMs in Hong Kong alone.
Similar to ATM purchases, with Bitcoin debit or credit cards purchases users pay directly from their bank account— either on an ATM machine or via a web interface— to a centralized exchange or broker. With these transactions, the card providers offer Bitcoin payment processor services, basically, facilitating the transaction. Also, like with Bitcoin ATMs, card transactions are relatively expensive.
Technically, a P2P trade constitutes a direct trade with buyer and seller, either via the web or in person. In other words, if you have a friend that owns Bitcoin and he or she is willing to sell this to you at a fair price, this may be your best option.
However, trading with strangers comes
with a high degree of security risk. This ranges from the risk of getting
scammed to the risk of trading with someone who is engaged in financial crime.
Over-the-counter (OTC) platforms
This is basically a P2P transaction, but then conducted under supervision to make the transaction convenient and safe for both parties involved.
Technically speaking, the traded asset is locked up in an automated waiting-wallet, controlled at the exchange’s end which releases the funds only after the seller has confirmed receipt of the agreed payment. Until payments are confirmed the coins remain in the waiting-wallet.
More simply put, an OTC exchange is a centralized exchange providing P2P exchange services, with an extra layer of oversight, and an escrow system, to make transactions more convenient and safe – all at a very low cost.
With OTC transactions, market prices are defined off an exchange’s public order book, as trading parties set their own prices, which may be slightly more expensive than the global spot price, or cheaper.
Buying and trading on an exchange
If you already have some altcoin in your wallet, you can trade it for Bitcoin on a centralized exchange, like AAX, provided the altcoin is listed on our exchange.
Now, once you have some Bitcoin in your wallet, you can either hold on to it for the long term or intelligently take advantage of price movements and make profits on the Bitcoin futures market, by either going long or short. At the moment, centralized exchanges, like AAX, are the best option for this type of activity.
How to choose an exchange for your first trade
Finding a trusted exchange is the first smart step every beginning trader must get right. Usually, a trusted exchange will require new users to verify their identity, to make sure market participants and capital flows involved in trades are not associated with crime or illegal activities. Also, security is another crucial element when choosing an exchange.
Finally, another important element is a high performing order book for traders to get a more competitive price. When researching an exchange it is important to see how deep the order book is. If you’re trading small amounts, the order book does not need to be particularly deep, but if you intend to trade large volumes, sometimes you’re better off trading on an OTC platform, unless the exchange is capable of handling large volume trades with speed.
Speaking of speed, presently, AAX is the only cryptocurrency exchange that uses the same matching engine as the London Stock exchange, as well as other top-tier, high volume stock exchanges. Therefore, it is capable of handling institutional order volumes with ultra-low latency.
AAX offers a Spot market, where you can trade across more than 70 trading pairs; a Futures Market where you can trade perpetual contracts for Bitcoin, Ethereum, Litecoin, XRP, and EOS, with high leverage; and an OTC marketplace where you can buy and sell crypto for fiat conveniently.