Hong Kong lawmaker Duncan Chiu has lambasted the "excessively stringent" regulations governing crypto exchanges, warning that these rules have driven major global exchanges away from the region and eroded market confidence. Chiu, a member of Hong Kong's Legislative Council, penned an opinion piece in the Hong Kong Economic Journal, lamenting the recent exodus of crypto exchanges and the damaging impact on Hong Kong's Web3 ambitions.

The Securities and Futures Commission's (SFC) licensing requirements have come under fire, with Chiu arguing that the rules are overly restrictive and lack a comprehensive strategic approach to industry development. The SFC's stipulation that crypto trading platforms must submit their license applications by February 29 or cease operations in Hong Kong by May 31 has led to the withdrawal of several global exchanges, including OKX, (link unavailable), and HTX.

Chiu contends that the licensing system is flawed, with various departments designing policies without a unified vision for the virtual asset market. He notes that some license applicants have expressed frustration with the authorities' lack of forward-thinking vision for next-generation fintech and the inflexibility of promoting Web3 with a traditional finance mindset.

The SFC's requirements, which mirror those for traditional financial institutions, appear "excessively stringent" when applied to Web3 finance, according to Chiu. Furthermore, the authorities' insistence on extensive experience in the crypto industry for licensed operators' management teams, coupled with a lack of regulators with practical Web3 experience, has created a communication chasm between the two sides.

Chiu's critique highlights the need for a more nuanced approach to crypto regulation, one that balances oversight with innovation and flexibility. As Hong Kong strives to establish itself as a Web3 hub, it must address these concerns and create a more welcoming environment for crypto exchanges and innovators alike. The future of Hong Kong's Web3 ambitions hangs in the balance, and it is crucial that regulators and lawmakers work in tandem to foster a thriving ecosystem.