Posted inAlternatives

Hong Kong reviews cryptocurrency regulations

The Securities and Futures Commission (SFC) is looking into whether crypto ETFs should be traded on exchanges.

As virtual assets apparently edge towards mainstream finance, the Hong Kong securities regulator revealed that it has received a number of enquiries from financial institutions eager to offer virtual assets to their clients.

Speaking at the Hong Kong FinTech Week 2021, Julia Leung, the SFC’s deputy chief executive officer and executive director of intermediaries, told the press that the watchdog is currently reviewing cryptocurrency regulations which were first set out in 2018.

“We are now reviewing the regulatory regime for virtual assets we introduced three years ago to see if it is still fit for purpose, and whether any modifications are required,” said Leung.

“We are in close contact with the Hong Kong Monetary Authority with a view to issuing a joint circular after the review.”

The areas under examination include whether to allow crypto-related ETFs to trade on conventional exchanges, retail investors to access crypto products through online brokers, and if there are any additional knowledge requirements or risk disclosures.

The current rules bar retail individual investors from participating in cryptocurrency trading, she explained.

Level playing field

The deputy CEO said that the review was prompted by more different types of virtual asset investment products now being made available and that conventional exchanges overseas are offering crypto ETFs.

Nonetheless, she admitted that the regulatory landscape is still uneven. Leung pointed out that, for instance, licensed firms can provide cryptocurrency trading services to clients either by acting as an introducing agent or through an omnibus account arrangement opened at a virtual asset platform.

While it is not decided whether the rules will be relaxed, Leung said the “same business, same risks and same rules” principle will be adopted for banks, brokers and digital platforms regarding their digital currency asset related business.

Currently, all virtual asset exchanges must be licensed if they want to operate in Hong Kong. In July, the SFC warned that cryptocurrency trading platform, Binance is not licensed or registered to trade stock tokens in Hong Kong, and can be prosecuted for offering stock tokens to the public.

Similarly, China has been cracking down on bitcoin mining and trading as part of ongoing efforts to prevent speculation and reduce financial risks. In the latest development, the Shenzhen branch of the Chinese central bank “cleansed and rectified” 11 newly established companies for involvement in illicit cryptocurrency trading in late August.

Part of the Mark Allen Group.