(Kitco News) - Hong Kong's financial regulator, the Securities and Futures Commission (SFC), is set to propose a subset of tokens that retail traders will be allowed to access as part of the special administrative region’s efforts to establish itself as a cryptocurrency hub.
According to a report from the South China Morning Post, the SFC intends to limit retail trading of virtual assets to “highly liquid products” once its new licensing regime for virtual asset service providers (VASPs) goes into effect in June.
Julia Leung Fung-yee, the newly appointed CEO of the SFC, indicated that the financial watchdog will issue a consultation paper before the end of Q1 that will outline the products available to retail traders along with licensing requirements for trading platforms.
“Some virtual assets platforms have over 2,000 products, but we do not plan to allow retail investors to trade in all of them,” Leung said in her first media briefing. “We will set the criteria that would allow retail investors to [only] trade in major virtual assets.”
Leung did not provide specifics on which virtual assets would be allowed, but said that only those assets with “deep liquidity” would be included on the list. When asked about access to Bitcoin and Ether, Leung did not respond but reiterated that only “highly liquid” assets will be allowed.
In December, Hong Kong’s Legislative Council amended the region’s Anti-Money Laundering and Counter-Terrorist Financing Act to establish new licensing rules for VASPs beginning in June of this year. Providers will now be required to apply for a license from the SFC to operate within nine months of the law taking effect.
The updated law also requires virtual asset trading platforms to have well-developed risk management procedures, enhanced internal controls, take increased measures to prevent cybersecurity risks, and establish proper custodian arrangements that help safeguard users’ assets.
“If there are proper regulations in place, then the likelihood of an FTX-type collapse will not happen in Hong Kong,” Leung said
Up to this point, only professional investors have been allowed to access virtual assets in Hong Kong markets. The inclusion of retail traders is intended to help expand the number of crypto holders in Hong Kong and help advance its goal of becoming a global crypto hub.
“We aim to have a proper regulatory framework to safeguard the interest of all investors and to enhance Hong Kong as a virtual asset hub,” Leung said.
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Over the past year, the special administrative region has increasingly warmed up to the cryptocurrency sector and has been looking for ways to ease restrictions.
In October, the SFC signaled that it was considering the introduction of a bill that adopts a different approach to regulating crypto than China and would allow retail investors to directly invest in virtual assets.
The country’s Financial Services and the Treasury Bureau (FSTB) reaffirmed those plans when it announced that it intended to conduct a public consultation on restoring “suitable” crypto access for retail inventors including the possible introduction of exchange-traded funds (ETFs) for virtual assets in its market.
The collapse of FTX in November initially caused some reservations about these plans and prompted Leung, who was deputy CEO of the SFC at the time, to call for tough rules to be implemented for crypto firms after the FTX bankruptcy highlighted the volatility of digital assets and the threat posed by extensive links with traditional financial services.
