The year 2022 was a year filled with challenges for the global cryptocurrency industry. Events, such as the collapse of the stablecoin TerraUSD (UST) and LUNA in May, Tornado Cash being sanctioned by the U.S. Department of the Treasury in August, and the crash of FTX in November occurred one after another. However, crises and opportunities always coexist, and crises that have been overcome are opportunities. Countries and regions where cryptocurrency is going mainstream, represented by the United States and Europe, have accelerated the improvement of their top-level designs. For example, the U.S. government has issued an Executive Order on Ensuring Responsible Development of Digital Assets, and the European Union (EU) is also advancing the Agreement on The Market in Crypto-Assets (MiCA). Since 2022, more than 42 sovereign countries and regions around the world have adopted 105 regulatory measures and guidance on the cryptocurrency industry, and the overall regulatory system has been developing in a clearly positive direction. However, as the regulations and supervision are becoming clearer, some cryptocurrency trading platforms frequently relocate their headquarters or offices. For instance, since 2018, many well-known trading platforms have announced their withdrawal from the Japanese and Hong Kong markets, and relocated their corporate headquarters to countries or regions with little or no supervision, such as Seychelles, Malta, and the Bahamas. The strange phenomena of this industry deserve our reflection.

1. Why Does the Trading Platform Relocate to Other Places?

For many reasons behind the phenomenon, the truth is always related to the confrontation with the government regulation. Some trading platforms may pursue the so-called reasonable and legal tax avoidance. For instance, companies registered in Seychelles and Bermuda do not need to pay capital gains tax, withholding tax or other taxes, and places like that are therefore known as “tax havens”; Or they do not want to be restricted to short-term rapid profit and limited scale expansion under the continuous regulatory pressure. For example, Japan sets purchase restrictions on ICOs to ban mutual transactions in different cryptocurrencies, which accelerates the platform relocation; It may also be that the platforms have non-compliant businesses. For example, they keep completely anonymous so that it will be easy for them to commit illegal money laundering, malicious fraudulent transaction volume to increase the platforms’ transaction depth or liquidity. As they cannot pass the review, they can only relocate to avoid supervision.

2. We Must Face the Hidden Problems Behind the “Relocation”

Security is the foundation of development, and stability is the precondition of security. In the long run, the selection of the headquarters of trading platforms should first consider how to maximize the protection and realization of investors’ rights and interests. On the one hand, relocating headquarters or offices to achieve reasonable and legal tax avoidance essentially destroys the stable investment environment for investors and exacerbates the platform risk and misconduct to seek short-term profit. The pursuit of short-term profits and rapid expansion can only bring temporary benefits, which is risky both for investors and platforms. Choosing an environment with a mature regulatory system and stable expectations is the only way to show the platform’s willingness to provide long-term stable services. On the other hand, the regulatory arbitrage brought by relocations makes money laundering and malicious counterfeiting in throughput became maladies in the regulated development of the cryptocurrency industry. However, it is also a shortcut for some trading platforms to generate revenue. For example, the total amount of cryptocurrency money laundering from 2015 to 2022 exceeded 67.7 billion US dollars, and the amount of money laundering grew at an annual rate of 67% from 2020 onwards, which reached 23.8 billion US dollars by 2022. This led to a more negative public attitude towards cryptocurrencies, which has become a constraint to the development of the industry. Nowadays, business compliance is not an option, but a must for trading platforms. The relocation of trading platforms as a way to confront regulators not only cannot solve the problem, but also bring many hidden hazards.

3. The Principle of “Operations in One Place” Posing Higher Requirements for the Trading Platforms

Whether to operate in one place or relocate to other places in nature reflects different platforms’ perceptions of regulations and predictions of industry development. We think that “Operations in One Place” can essentially meet the continuity and stability of regulations and maximize the rights and interests of investors. Meanwhile, it also puts higher requirements on how to choose “the place” for trading platforms. As mentioned above, platforms should be willing to provide long-term and stable services and choose a country or region with a sound regulatory framework for cryptocurrencies and an expected stable and favorable legal system. Taking Hong Kong as an example, the cryptocurrency regulations here follow the existing financial regulatory framework which is mature and complete, and the underlying logic of the regulatory policy and regulations is consistent with international standards. The regulatory attitude is prudent and responsible, which can better control the overall risk of the industry and promote the trading platform to enhance investor protection. At the same time, insisting on “Operations in One Place” will also encourage trading platforms to deeply understand the local market and conduct research and development oriented to investors’ needs, which will result in a higher level of product adaptability and an easier way to approach investors’ expectations. Only those focusing on the experience of the investors can last for a long time. In addition, under a unified and stable regulatory system, trading platforms that operate in one place can truly understand and implement policies, act as a firm practitioner of policies, and interact positively with regulators to promote the establishment of a standardized ecology in the industry, contributing to the healthy and sound development of the industry.

Hong Kong enjoys a stable financial system, effective macroeconomic and prudential policies, as well as an increasingly robust regulatory and supervisory framework for the cryptocurrency industry. Accumulus, as a localized cryptocurrency trading platform born and grown in Hong Kong, will firmly choose Hong Kong as “the place” to conduct business operations. We will take it a priority to maximize compliance with the regulatory policy requirements of Hong Kong and maximize the protection of investors’ rights and interests as the core mission of the platform development. Based on the industry’s long-term value in the next 30 years, Accumulus will serve the people with long-termism and share the benefits of the cryptocurrency development.