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Hong Kong’s New Crypto Regulations and CBDCs: An Interview with Taras Dovgal

A cryptocurrency industry veteran coder and serial entrepreneur, Taras Dovgal has been active in the space since 2017. Apart from building dozens of crypto products from scratch, he founded a crypto venture capital firm that mentored and invested in budding crypto projects. With his hands-on experience, Taras Dovgal is a valuable asset in the crypto space, offering his knowledge and expertise to guide others in their exploration of the crypto world with his enthusiasm and dedication. He believes that success in the cryptocurrency industry depends on the power of collaboration among enthusiasts.

Taras is passionate about creating user-friendly products that make it easier for people to use and understand crypto technology. Throughout his articles, he discusses what qualities are necessary for a crypto product to gain widespread adoption from his perspective as a developer and entrepreneur. A major part of his mission is to raise awareness of blockchain technology among the average user and to provide developers with practical ideas on how to mainstream it.

The crypto industry is seeing a remarkable unfolding of events as more and more people embrace crypto across the globe. Since crypto is no longer a fringe asset, regulators cannot stand aside, so they have to develop standards and regulations. Various governments around the world have stepped in and worked toward providing stability and safety to crypto users.

For example, a Hong Kong regulatory framework recently proposed allowing retail investors to participate in the digital asset market, until recently restricted to institutions and professionals with over $1 million in capital.

During his interview with CoinEdition, Taras’ insights included how the new framework represents Hong Kong’s increased commitment to ensure its regional competitiveness as a financial hub as well as what the future holds for CBDCs. Taras’ expertise and competence developing crypto solutions for governments makes him an excellent resource for this discussion.

To begin with, we asked Taras why he thought Hong Kong issued these new crypto regulations, considering the strict previous rules that limited crypto trading to institutions, and China’s outright ban on cryptocurrency in 2021.

“In the 1980s, Hong Kong created the Hong Kong Stock Exchange, which became the premier venue for Hong Kong companies to raise capital. It encouraged the growth of other financial institutions, such as banks and investment firms, which further increased the economic development of Hong Kong. This allowed the region to become a major player in the global financial market and to attract international investors,” Taras said.

“The government of Hong Kong clearly intends to capitalize on the growing crypto industry. This is likely to make the region more attractive to investors, entrepreneurs, and businesses and could lead to Hong Kong becoming a crypto hub,” he added.

Moreover, he noted that other parts of the world are crypto-friendly in terms of regulation and infrastructure to make crypto widely accepted. For instance, Switzerland is already a global leader in crypto adoption with its Crypto Valley in Zug, which is a hub for many crypto and blockchain-based businesses and projects. Hong Kong is also in great shape to achieve that status.

“Also, Hong Kong’s position against regional rival Singapore was hampered by pandemic restrictions. Due to Hong Kong’s isolation from the rest of the world for quite some time, Singaporean banks have been able to channel foreign cash into their accounts, while Hong Kong banks have lost local currency deposits.

As a result, Hong Kong faced a significant challenge in keeping up with the competition from Singapore, as it was unable to attract foreign capital and investments to the same degree as its regional rival.

So Hong Kong needed to do something to signal that it is back in business. Through new crypto regulations, Hong Kong could level the playing field with Singapore and regain its prominence as a financial hub. This is especially since Singapore prohibits cryptocurrency services from being advertised in public spaces, as well as trivializing cryptocurrency trading,” Taras said.

Even so, he pointed out that Hong Kong’s capital market activity is still much higher than Singapore’s. For this reason, it had to maintain its competitive advantage. This requires a proactive approach to improving and maintaining Hong Kong’s lead in terms of regulation, taxation and liquidity.

A Cambrian explosion in CBDCs

Afterward, we discussed CBDCs, something that basically divides the crypto community, with one part seeing it to be a good thing and the other believing that it is pure evil. In that regard, we were curious to know Taras’ opinion.

“If you look at facts alone, CBDC projects are exploding worldwide, with 114 nations exploring CBDCs compared with 35 countries in 2020. The pilot program in China, which reaches 260 million people, will expand to the rest of the country this year. The Hong Kong government is also working on e-HKD creation. Over 20 countries will pilot CBDCs this year.

The sanctions against Russia have led to countries considering payment systems that do not use the dollar. CBDC experiments have now reached 9 cross-border wholesale projects and 7 retail projects, almost doubling since 2021. You can see where the trend is heading,” Taras said.

Also, he noted that globalization is evolving into localization, with each government deciding what is best for them.

“In the future, central bank digital currencies may coexist with public blockchain tokens, or authorities may decide to ban them altogether. The only way to find out if governments end up being the heroes or the villains of this crypto-story is to wait and see. The future will reveal whether this technology will be used to empower citizens or governments. However, it is certain that it will bring about massive changes to how we interact with money,” Taras concluded.