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(Kitco News) - The Hong Kong Securities and Futures Commission (SFC) has announced that it will begin accepting applications on June 1 for crypto trading platforms looking to serve retail investors.
According to a report released on Tuesday that outlined the regulator's consultation conclusions on proposed policy recommendations for virtual asset trading platforms, the public has thus far been open to the proposed requirements, though some have sought further clarification.
The public feedback period for the proposed regulations was originally opened in February, and the SFC received 152 written submissions from industry and professional associations, professional and consultancy firms, market participants, licensed corporations, individuals and other stakeholders.
Based on the feedback received, the SFC has modified some of the proposed requirements to help ensure a smooth rollout. Moving forward, the regulator plans to implement multiple measures designed to help protect investors including ensuring suitability in the onboarding process, good governance, enhanced token due diligence, admission criteria and disclosures.
“Providing clear regulatory expectations is the key to fostering responsible development,” said Julia Leung, CEO of the SFC. “Hong Kong’s comprehensive virtual assets regulatory framework follows the principle of ‘same business, same risks, same rules’ and aims to provide robust investor protection and manage key risks. This will enable the industry to develop sustainably and support innovation.”
The new guidelines for virtual asset trading platform operators, set to go into effect on June 1, spell out the requirements for the safe custody of assets, segregation of client assets, avoidance of conflicts of interest, and cybersecurity standards and requirements expected of licensed trading platforms.
All operators of virtual asset trading platforms who agree to comply with the terms and conditions of the SFC’s updated standards are now encouraged to apply for an operator's license. Those that do not wish to obtain a license are expected to proceed with “an orderly closure of their business in Hong Kong,” the announcement said.
The rollout of the new regulations is a welcome sight for companies aiming to establish operations in Hong Kong as the SFC has yet to approve any virtual asset trading platform to provide services to retail investors. Most virtual asset trading platforms currently accessible by the public are not regulated by the SFC and will need to obtain a license to operate if they wish to stay in business.
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Blockchain-related activity in Hong Kong has been on the rise over the past year as the region has received behind-the-scenes approval from China to expand its cryptocurrency ecosystem.
In February, it was revealed that representatives from China’s Liaison Office and other officials have been regular attendees at Hong Kong’s crypto gatherings in recent months. The representatives have reportedly adopted a friendly approach to working with companies by checking on developments, asking for reports, and in some instances, making follow-up calls.
In the official 2023-2024 budget released by Hong Kong, Financial Secretary Paul Chan revealed that the Special Administrative Region would be allocating HKD$50 million ($6.5 million) to help develop the country’s Web3 ecosystem and included plans to integrate China’s central bank digital currency – the digital yuan – with their own program.
