Analysis: Major global crypto futures markets may face regulatory changes

Proposed regulations for Hong Kong’s blockchain industry could have far-reaching implications for the crypto derivatives market, according to new research from Messari.io.

In a report published Wednesday, researcher Mira Christanto said the Hong Kong Special Administrative Region, a major cryptocurrency futures trading market, may crack down on unregulated exchanges as part of its increased regulation.

The researcher cited a recent proposal by Hong Kong’s Securities and Futures Commission (SFC) that all crypto businesses should comply with anti-money laundering regulations. This is a significant change from a year ago when the SFC announced that it would only regulate companies in the “securities” sector.

Previously, the SFC only regulated assets that met the legal definition of securities or futures — a definition that excluded cryptocurrencies.

As Cointelegraph reported earlier this month, the Hong Kong government has proposed bringing all crypto assets under the supervision of its securities regulator. The regulatory effort appears to be part of a global move to rein in cryptocurrency exchanges, possibly under the guise of money laundering concerns.

As Messari points out, Hong Kong happens to be the most dominant player in the crypto futures market. Nearly three-quarters (72%) of Ethereum (ETH) futures and 57% of Bitcoin (BTC) futures come from the Hong Kong Special Administrative Region.

Hong Kong’s crypto futures market Source: Messari.io

Christanto said:

"Many people don't realize the role Hong Kong plays in the global cryptocurrency space. Hong Kong is home to some of the biggest companies and dominates the growing futures market."

Hong Kong is home to a large number of cryptocurrency exchanges and market service companies, including BitMEX, Bitfinex, Crypto.com, and FTX. Exchanges such as OKEx, Huobi, and Bybit have regional offices in Hong Kong. Large industry players such as Tether, Cardano, and EOS issuer block.one are also located in Hong Kong.

If the new proposal is passed into law, companies that continue to operate without a license could face severe penalties. Executives at the companies that run these platforms could even face jail time.

As Messari points out, only two crypto financial services companies have been granted licenses in Hong Kong so far.