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SFC eyes tougher regulations for virtual asset trading platforms

In a bid to make sure investors are ‘adequately protected and key risks are effectively managed’.
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Hong Kong watchdog Securities and Futures Commission (SFC) has unveiled a consultation on the proposed requirements for operators of virtual asset trading platforms.

Under changes to take effect on 1 June 2023, all centralised virtual asset trading platforms carrying on business in Hong Kong or actively marketing to Hong Kong investors will need to be licensed by the SFC.

The SFC’s proposed regulatory requirements for virtual asset trading platforms are based on the regulatory requirements of the existing regime under the Securities and Futures Ordinance and are comparable to those for licensed securities brokers and automated trading venues.

The regulator said that 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 regime. Those which do not plan to apply for a licence “should start preparing for an orderly closure of their business in Hong Kong”, it added.

The SFC has also taken the opportunity to propose modifications to some requirements of the existing regime. As part of the consultation, the SFC is seeking views particularly on whether to allow licensed platform operators to serve retail investors, and if so, the measures to be implemented in addition to the proposed range of investor protection measures, which include ensuring suitability in onboarding clients and token admission.

Julia Leung, SFC chief executive, said: “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.”

This story first appeared on our sister publication, International Adviser.

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