From Coindesk By Sam Reynolds| Edited by Nelson Wang

Crypto regulations are a competitive business in Asia, with places such as Hong Kong and Singapore vying to become Asia’s crypto hub and capture all the business associated with that status.

The challenge, though, lies in crafting a rulebook that balances investor protections with a welcomingness to businesses and new capital. And here, Hong Kong has an advantage over places like Japan or Korea, since its common-law framework for traditional finance has made its economy one of the most open and free in the world — a recent report from a Canadian think tank deemed Hong Kong the “freest economy” in the world, with Singapore just behind it in second place.

With crypto, however, Hong Kong has moved relatively slowly, especially compared to Singapore. But Duncan Chiu, a member of Hong Kong’s Legislative Council and chair of its Technology and Innovation committee, which oversees Hong Kong’s technology parks and research facilities, says the territory’s initial caution with respect to regulating crypto comes with advantages.

“Being a late mover is a good thing sometimes because you have a clear picture,” said Chiu in a recent interview with CoinDesk. For example, he pointed to how the Monetary Authority of Singapore (MAS), the city-state’s main financial regulator, has moved quickly to pass rules for crypto. MSA initially regulated crypto under its Payment Services Act, treating crypto inaccurately as a payment tool rather than an asset class. Japan did the same thing early on, forcing later revisions in 2024 as DeFi and tokenization eventually gained traction.

“While Hong Kong started late, the good thing is there were clearer patterns of how these products were being used," said Chiu, who is one of the most prominent voices for crypto in Hong Kong, along with fellow LegCo member Johnny Ng. Chiu further pointed out how the original bitcoin white paper labeled the asset class as electronic cash, while the market reality is it’s become more of a commodity — a view shared by the U.S. Commodity and Futures Trading Commission — as another example of how market behavior around crypto has evolved and needed regulations to adapt.

Building regulatory alignment

One of the key issues Chiu said he'd like to work on in the LegCo is building a clear classification for different types of digital assets, such as cryptocurrencies vs. stablecoins, while also working with global regulators to ensure alignment among them.

“We need clear definitions and segmentation,” Chiu explained. “Some assets should be regulated like securities, while others should remain unregulated, like memecoins.”