By On November 6, 2019, Hong Kong’s financial watchdog published a regulatory framework for cryptocurrency exchanges in the country.
The Securities and Futures Commission (SFC), the country’s securities supervisory body, said the new regulations would cover custody, know-your-customer rules and the storage of crypto assets, among other subjects.
Ashley Alder, head of the SFC, first announced initiatives to regulate digital currencies at Hong Kong’s 2018 Fintech Week.
The regulator is now taking that work forward this year, as confirmed by Alder who told the 2019 Fintech conference:
“The framework will enable virtual asset trading platforms to be regulated by the SFC, a major development which builds on a way forward I outlined at the same time last year.”
The new regulations close a regulatory loophole, as neither digital currency funds nor the exchanges that enable trade in crypto were under the control of the Hong Kong Monetary Authority or the SFC.
Why This Is Great News for The Crypto Space
According to Gary Cheung, chairman of Hong Kong Securities Association, the new SFC regulations will enhance investor protection and therefore attract more mainlanders to trade cryptocurrency in Hong Kong.
Gray added that the initiative would help Hong Kong to be among the top cryptocurrency trading centres worldwide because proper regulation is essential for attracting big crypto investors.
In formulating the crypto regulations, the securities watchdog has mostly focused on protecting investors from scams based on digital assets.
Who Will Be Allowed to Trade Under The New Laws?
According to the set regulations, only professional investors will be allowed to participate for the time being. Under Hong Kong law, professional investors are those with at least HK$8 million (US$1.02 million) in investment assets and two years of experience.
The SFC emphasizes that it is the responsibility of fund managers, brokers and platform operators to ensure that only professional investors are trading.
Another key stipulation is that funds that invest more than 10% of their assets in digital currencies will need to be licensed by the SFC, ending an era where private equity funds could operate unrestricted in the crypto space.
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