Neal Kimberley

Macroscope | Hong Kong’s cryptocurrency hub ambition makes good sense against FTX’s crash

The sorry saga may prove an inflection point that results in investors demanding that cryptocurrency exchanges be headquartered in well-regulated jurisdictions with good governance – like Hong Kong

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A digital screen displays the prices of cryptocurrencies in Hong Kong on March 25. Photo: Bloomberg

Neal Kimberley

Published: 10:00pm, 15 Nov 2022

Not everyone thinks much of cryptocurrencies, certainly not Nassim Nicholas Taleb, the financial mathematician and celebrated author of the bestseller, The Black Swan. On the flip side, Hong Kong’s government is determined to promote Hong Kong as an international cryptocurrency hub.

But even those who feel cryptocurrencies are just all hype have to recognise that there are a lot of investors, and a lot of capital, that think the opposite.

Consequently, with cryptocurrencies as an asset class not looking as if they are going to disappear, it makes perfect sense for Hong Kong to seek to create a well-regulated environment in which investors can pursue opportunities in the cryptocurrency space with a greater degree of comfort.

Admittedly, one of the attractions of cryptocurrencies for investors of a libertarian persuasion has been that cryptocurrencies largely exist beyond the technical and jurisdictional reach of governments, central banks and regulators. But that characteristic of cryptocurrencies also comes with risks, especially when investors choose to hold their cryptocurrencies in client accounts with offshore exchanges.

“Crypto: a gigantic construction built by maladjusted children,” Taleb tweeted on November 10 as the extent of the financial difficulties at FTX.com, a leading cryptocurrency exchange, was becoming increasingly clear.

That tweet will not have played well with those who believe in cryptocurrencies but in fairness to Taleb, a long-standing cynic on this matter, it encapsulated a view he has consistently expressed.