The Hong Kong Securities and Futures Commission (SFC) published on Monday its virtual asset trading rules. The government body is seeking comment from public experts on the findings.
According to the document, regulators will offer licencing for cryptocurrency firms and will determine if those receiving them can serve retail investors. It will also outline investor protection measures.
The notice said: “Operators of virtual asset trading platforms which plan to apply for a licence, including pre-existing platforms […], should begin to review and revise their systems and controls to prepare for the new regime. Those which do not plan to apply for a licence should start preparing for an orderly closure of their business in Hong Kong.”
Additional measures will require operators to perform due diligence on cryptocurrencies by monitoring and assessing liquidity over time. It will also determine who owns holdings on the platforms and how the wealth is concentrated.
Crypto operators can only trade tokens for the SFC’s requirements, meeting “eligible large-cap virtual asset posted on designated indices. It also requires smart contracts to ensure security checks.
Comments and Plans for Hong Kong Crypto
Julia Leung, SFC chief executive, said in a statement,
“As has been our philosophy since 2018, our proposed requirements for virtual asset trading platforms include robust measures to protect investors, following the ‘same business, same risks, same rules’ principle. In light of the recent turmoil and the collapse of some leading crypto trading platforms around the world, there is clear consensus among regulators globally for regulation in the virtual asset space to ensure investors are adequately protected and key risks are effectively managed.”
The report concluded that some platforms aimed to offer derivatives, leading to probes on sufficient business models and market demand. This comes after the SFC opened regulated crypto-based derivatives to some investors in January last year.
The organisation also aims to hold further reviews to outline related policies. Consultations will close on 31 March and licencing protocols will enter on 1 June, the report concluded..
The report comes after Hong Kong announced it would introduce further regulations and the development of a potential stablecoin for future use. Hong Kong will also receive Samsung Asset Managment’s Bitcoin-based futures exchange-traded funds (ETF) in the Chinese finance hub.
