HK to Become Major Crypto Trading Hub Regulated by Securities Watchdog

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By Maud Guon Nov 02, 2018
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The Securities and Futures Commission has recently unveiled a new regulatory approach for virtual assets, planning to grant licenses to crypto exchanges in the future.

Hong Kong moves a step closer to becoming one of the world’s top crypto trading hubs after the SFC announced new regulations for virtual assets on November 1.

Under the SFC, virtual asset portfolio managers and fund distributors will be regulated. Ashley Alder, CEO of the SFC, said that the watchdog also proposed a conceptual framework to “explore a pathway for compliance for virtual asset trading platform operators who are willing to be supervised by us.”

Key takeaways from the statement:

  • In the initial exploratory stage, the SFC will not grant a license to platform operators. If the SFC decides to grant a license to qualified crypto exchanges in the future, it will impose appropriate licensing conditions and the operator will proceed to the next stage of the sandbox
  • Crypto funds or trading platforms are available only for professional investors. Retail investors are not allowed to invest in virtual asset portfolios
  • For the moment, only virtual asset portfolio managers that intend to invest 10% or more of the gross asset value (GAV) of the portfolios under its management in virtual assets will be subject to the SFC’s oversight
  • Virtual asset portfolio managers—whether or not their virtual assets amount to “securities” or “futures contracts”—are subject to the purview of the SFC
  • If firms are engaged in the distribution of funds which invest in virtual assets, irrespective of whether these assets constitute “securities” or “futures contracts”, these firms are required to be licensed by or registered with the SFC

“The measures announced today allow us to regulate the management or distribution of virtual asset funds in one way or another so that investors’ interests would be protected either at the fund management level, at the distribution level, or both,” said Mr Ashley Alder. “We hope to encourage the responsible use of new technologies and also provide investors with more choices and better outcomes.”

By adopting a new regulatory approach for the crypto trading market in Hong Kong, the SFC aims to strengthen investor protection and win over more crypto investors worldwide. In a report by the South China Morning Post, Gary Cheung, Chairman of the Hong Kong Securities Association, shared his views on the SFC’s new move. “This will help Hong Kong to be among the top cryptocurrency trading centers worldwide because proper regulation is very important for attracting the big players.”

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