Singapore solidified its position as a leading digital asset hub in 2024, significantly outpacing rival Hong Kong in attracting cryptocurrency firms and fostering innovation in the sector. Singapore granted 13 new crypto licenses this year, more than double the number issued in 2023, to major players like OKX, Upbit, Anchorage, BitGo, and GSR. In contrast, Hong Kong’s licensing progress has been considerably slower.
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Both cities are vying to become the preferred destination for digital asset companies in Asia, offering specialized regulatory frameworks, tokenization initiatives, and regulatory sandboxes. While both recognize the potential of crypto to enhance their status as global financial centers, their approaches and results have diverged.
Regulatory Differences Shape the Landscape
A key differentiator lies in their regulatory approaches. Hong Kong’s regulations are perceived as more stringent, particularly regarding custody of customer assets and token listing policies. “Hong Kong’s regulatory regime for exchanges is more restrictive in a number of ways that matter,” notes Angela Ang, senior policy adviser at TRM Labs. This stricter environment may have contributed to Singapore’s advantage.
Hong Kong has fully licensed only seven platforms, with four receiving approval (with restrictions) in December. Seven more hold provisional permits. Notable exchanges like OKX and Bybit have withdrawn their applications for Hong Kong licenses. Furthermore, Hong Kong currently restricts trading to highly liquid cryptocurrencies like Bitcoin and Ether, excluding smaller, more volatile altcoins. This limited scope impacts profitability, according to Roger Li, co-founder of Hong Kong-based crypto exchange store One Satoshi.
Geopolitical Factors and Risk Assessment
Beyond regulatory differences, geopolitical considerations also influence companies’ decisions. China’s ban on crypto trading adds a layer of complexity to operating in Hong Kong, given its status as a special administrative region. David Rogers, regional chief executive at market maker B2C2 Ltd., highlights this distinct risk profile, emphasizing Singapore’s supportive environment as a “safe, long-term choice” for a regional hub.
Innovation and Institutional Engagement
While both cities have facilitated blockchain experimentation within established financial institutions, their approaches to fostering broader innovation differ. Singapore’s Project Guardian and Global Layer 1 initiatives actively promote asset tokenization and collaboration between new entrants and established players. Hong Kong, while overseeing successful tokenized green bond sales, focuses more on established institutions. This difference, according to Ben Charoenwong, associate professor of finance at INSEAD, potentially limits the scope of innovation in Hong Kong.
ETF Performance and Future Outlook
Hong Kong launched spot Bitcoin and Ether ETFs in April, but they have garnered significantly less investment compared to their US counterparts. The combined assets under management for these ETFs in Hong Kong are around $500 million, dwarfed by the over $120 billion held by US issuers. This disparity further underscores the challenges Hong Kong faces in attracting significant investment in the digital asset space. As the digital asset landscape continues to evolve, Singapore’s proactive approach and more flexible regulatory framework appear to have positioned it for continued growth and leadership in the region. Hong Kong, while possessing significant potential, needs to address its regulatory hurdles and broaden its scope to compete effectively.
