Hong Kong is increasing its efforts to formally regulate cryptocurrency exchanges in the city.
The Securities and Futures Commission (SFC) has released a newly drafted regulatory framework, which allows the securities watchdog to issue licenses to crypto trading platforms.
In 2018, the SFC announced a regulatory sandbox providing a confined environment for fintech companies to explore regulatory innovations and frameworks. At the latest HK FinTech Week, Ashley Alder, head of the SFC announced that the city’s securities watchdog has now established a new comprehensive set of regulations for cryptocurrency exchanges in Hong Kong.
The rules are focused on the crypto industry, covering key investor protection concerns including the safe custody of assets, KYC requirement, anti-money laundering and market manipulation. Alder also revealed that concepts that don’t exist in the traditional financial market space such as hot and cold wallets, forks and airdrops are also included.
Cryptocurrenies and virtual assets listed on an SFC-licensed platform will not be subject to the same kind of regulation applied to traditional offerings of securities or investment funds. All licensed platforms are to have insurance covering the risk of virtual assets being lost or stolen.
“Virtual assets have moving further into conventional financial markets,” says Alder, who also highlights that some projects are “capable of being adopted extremely rapidly on global scale. The fast pace of adoption of these projects – such as stablecoins – on an international scale has led of some anxiety. Alder notes that there are “serious concerns among politicians and central bankers and financial regulators.”
The new regulatory framework allows the SFC to grant a license to exchange operators that wish to opt-in to regulation. In other words, it is not a must for crypto exchanges in the city o acquire a license to operate.
