Hong Kong may benefit from FTX collapse as investors consider role of comprehensive regulation in growing the crypto market

The rapid rise and fall of FTX appears to have vindicated the cautious approach taken by the Hong Kong government in the crypto market

That collapse has likely made participants in the crypto industry more accepting of a comprehensive regulatory framework, experts say

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The collapse of FTX appears to have vindicated the cautious approach taken by the Hong Kong government in the cryptocurrency market. Photo: Shutterstock

Published: 7:00am, 16 Nov 2022Updated: 7:37am, 16 Nov 2022

Hong Kong has emerged largely unscathed from the collapse of FTX, according to market experts, after the bankrupt cryptocurrency exchange left tens of billions of dollars in liabilities and became the target of investigations from the United States to the Bahamas.

FTX was founded in Hong Kong in March 2019 by Sam Bankman-Fried, who moved the company’s headquarters to the Bahamas in September last year because of the city’s conservative regulatory approach to cryptocurrencies.

“We definitely dodged a bullet,” said David Chang, partner at Hong Kong venture capital firm MindWorks, which was one of the first institutional investors in the city that FTX approached for its Series A funding round in February last year.

While MindWorks had doubts about the experience of the FTX team and their financials, Chang said the main reason the company did not take part in that funding round was because Hong Kong’s regulations on digital assets were not clear and that they could not invest institutional money into “something that’s in the grey area”.

Sam Bankman-Fried, founder of FTX, speaks during the Institute of International Finance annual membership meeting in Washington on October 13, 2022. Photo: Bloomberg

Those who have invested in FTX since 2019 include Singaporean state holding company Temasek Holdings, crypto exchange giant Binance’s venture arm Binance Labs, Sequoia Capital, world’s biggest asset manager BlackRock, American football player Tom Brady, super model Gisele Bundchen, SoftBank Vision Fund 2 and the Ontario Teachers’ Pension Plan.

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