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FTX collapse does not change Hong Kong’s ‘cautious’ approach to becoming crypto hub, Financial Secretary Paul Chan says

  • FTX’s bankruptcy only shows even more that the industry needs greater transparency and regulation, Hong Kong Financial Secretary Paul Chan said
  • Once the second-largest cryptocurrency exchange in the world, FTX’s rapid decline has sent crypto prices spiralling and shaken investor confidence

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Hong Kong Financial Secretary Paul Chan Mo-po attends the Global Financial Leaders’ Investment Summit at the Four Seasons Hotel in Central on November 2, 2022. Photo SCMP / Sam Tsang
Xinmei Shen

Hong Kong’s top finance official has reiterated the city’s commitment to becoming a virtual asset hub, saying in a blog post that industry regulation is even more attractive to investors in the wake of FTX’s collapse.

The collapse of cryptocurrency-related companies “one after another”, including a large bankruptcy last week, has only made the industry believe even more in the need for greater platform transparency and regulatory compliance, Hong Kong Financial Secretary Paul Chan Mo-po wrote in a post to his office’s official blog on Sunday, without naming any companies.

“Our policy statement released recently is conducive to building such an environment, and has made the industry very hopeful about the development of Hong Kong’s virtual asset market,” Chan wrote.

FTX, until recently the world’s second largest cryptocurrency exchange, entered a sudden downward spiral last week after Binance Holdings chief executive Zhao “CZ” Changpeng announced plans to sell his company’s roughly US$530 million in FTT after CoinDesk reported that the native FTX token was the biggest asset holding of sibling company Alameda Research.

The meltdown accelerated after a preliminary deal for rival Binance to buy FTX fell apart. Institutions and retail investors alike have suffered losses as the revelations about FTX spilled over to the rest of the cryptocurrency market, pushing down token values across the board.

Founder Sam Bankman-Fried, commonly known as SBF, apologised and stepped down as CEO in an announcement revealing that his firm had filed for bankruptcy.

It is an ironic twist of fate for the crypto founder who over the past year has become known for his advocacy for more regulation of the industry, something that reportedly angered some of his more libertarian-leaning rivals. In September 2021, SBF moved FTX to the Bahamas from Hong Kong, citing a friendlier and clearer regulatory framework for cryptocurrencies in the archipelago.

SBF founded the quantitative trading firm Alameda Research in November 2017 and moved the headquarters to Hong Kong two months later. In 2019, he founded FTX in the city. Alameda CEO Caroline Ellison also lived in Hong Kong for a time, having been with the company since 2018. She became co-CEO in October 2021 and the sole CEO in August.

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