Unlike in the United States where authorities are cracking down on the crypto industry, the regulations governing the industry are “more clearly defined and commercially viable in markets like Hong Kong, Singapore, and the UAE,” Stephan Lutz, the group CEO and CFO of the crypto exchange Bitmex, has said.
U.S. Crackdown Driving Away Talent
In his written answers to questions from Bitcoin.com News, Lutz hailed regulatory frameworks such as the one adopted by Hong Kong’s Securities and Futures Commission because it “provide[s] standards for digital assets that are crucial for this fast-growing asset class.”
Concerning the likely impact on innovation of the United States government’s so-called Operation Choke Point 2.0, the Group CEO concurred with many crypto proponents who argue that such a clampdown will only drive away talent. The crackdown has and will indirectly benefit Hong Kong which according to Lutz is attempting to make itself “the epicenter of the crypto industry in Asia.” The CEO also touched on Bitmex’s product offering and why the crypto exchange is not offering services such as high-risk lending services.
Below are Lutz’s detailed answers to all questions sent to him via Telegram.
Bitcoin.com News (BCN): Stephen, regulators in the U.S. appear to have stepped up enforcement actions against crypto companies. There are also allegations that the regulators are trying to “de-bank” crypto. Can you shed light on the recent developments and what this so-called Operation Choke Point 2.0 is all about?
Stephan Lutz (SL): After months of growing regulatory scrutiny and legal enforcement against crypto companies and their service providers in the United States, aka Operation Choke Point 2.0, we started to see the first evasion effects with local champions such as Coinbase and Gemini announcing plans to grow in offshore markets – evidence that they are shifting resources to attract international clients, with Asia being the focus.
While the U.S. is choking the crypto industry and the EU has lower interest from users combined with a smaller market, Asian markets have a broad customer base with access to services. Consequently, Asia is the horse to bet on in the near-midterm, with some CIS markets like Turkey and UAE as the second fastest-growing market segment.
Foreseeing competition to intensify and embracing forthcoming changes, we double down on our commitment to product innovation and building the best trading experience for crypto derivative traders.
BCN: The U.S. regulatory crackdown against crypto could scare some developers and companies. If the enforcement actions continue without regulatory clarity, do you think it could slow the pace of innovation in the United States?
SL: Yes, as there is a risk of top talent moving to markets that offer more regulatory certainty and lower risk, such as Singapore, Hong Kong, Europe, and the UAE.
BCN: Even if some crypto projects want to shift base to another location, it often takes more than just favorable regulations to convince them to move to a different country or jurisdiction. What makes Asian jurisdictions like Hong Kong, Singapore, or Dubai attractive destinations for such companies?
SL: I believe that the Asian digital assets market is poised for a bright future, with a supportive regulatory environment, an active venture capital market, and a diversified talent pool. Regulation is more clearly defined and commercially viable in markets like Hong Kong, Singapore, and the UAE. Since China is experimenting with CBDCs, Chinese banks in Hong Kong are now actively asked to support crypto businesses. To a money manager that means China is preparing for the asset class, making it a much lower risk to allocate funds to it than say six months ago.
Those who visited Hong Kong in the past few weeks must have observed the Web3 spirit in the city. It’s clearly positioning itself to reclaim its position as the epicenter of the crypto industry in Asia, with a government that is embracing blockchain technology and actively competing with other Fintech hubs around the world.
BCN: Your company Bitmex has most of its operations and users in Asia meaning you may have some first-hand experience with Asian regulatory and market conditions. Despite China’s apparent anti-crypto stance, do you think Hong Kong can thrive as a crypto hub?
SL: Historically, Hong Kong has not just been one of the most popular breeding grounds for crypto innovations, but also where Bitmex first emerged. We believe the Securities and Futures Commission’s regulatory framework is a significant milestone for our industry as it will provide standards for digital assets that are crucial for this fast-growing asset class.
On a personal level, I’m delighted to see the administration’s commitment to building a Web3 digital economy, starting with establishing clear guardrails and regulations. We are optimistic that Hong Kong will achieve its ambition of becoming a world-leading Web3 role model city and potentially the Web3 hub for China in years to come.
BCN: Bitmex primarily offers crypto derivatives trading to institutional and professional traders rather than the retail crypto audience. What does your exchange offer to institutions and professionals that other exchanges don’t?
SL: Bitmex offers the safety of assets, a solid and reliable exchange business without offering any high-risk lending services that could potentially derail the organization, an active community of experienced traders connected in the Bitmex Trollbox, leading BTC-margined contracts, and one of the fastest API-trading interfaces in the market. And, in all honesty, we are one of the few platforms that are not printing fake volumes.
BCN: Crypto has financial as well as non-financial use cases, with applications in a wide range of industries. So, what, in your opinion, are the key points that regulators should look at to build a fair regulatory model?
SL: Unlike the United States, we can see Europe moving forward with a regulatory framework called Markets In Crypto Assets (MICA) for cryptocurrencies and stablecoins that are not regulated by its existing financial services legislation.
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