Hong Kong announces regulatory framework for crypto

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The Hong Kong Securities and Futures Commission (SFC) has just announced its new regulatory standards for virtual assets portfolio managers and fund distributors.

This move comes as an urgent response to “the leverage inherent in possessing virtual assets via funds and the seeming awareness of investors about the presence of unlicensed trading operators in Hong Kong,” says CCN. Furthermore, under the existing regulatory remits in Hong Kong, the legal definition of “securities” or “future contracts” placed a question mark over the ability of the SFC to exercise oversight for all virtual assets. Therefore, action was needed.

The related part of the statement from the SFC reads:

“While virtual assets have not posed a material risk to financial stability, there is a broad consensus among securities regulators that they pose significant investor protection risks. The regulatory response to these risks varies in different jurisdictions, depending on the regulatory remit, the scale of the activities and their impact on investor interests and whether virtual assets are deemed financial products suitable for regulation.”

Hong Kong’s new crypto regulations

This will be of interest to many. The new SFC framework essentially assigns a large proportion of digital assets the definition of “security” or “futures contract.” In addition to this, the announcement said: “ firms managing funds which solely invest in virtual assets that do not constitute securities or future contracts” will be required to acquire a license for dealing in securities as well as the distribution of these funds in Hong Kong. Plus, the scope of the SFC’s supervision will also cover firms that are licensed, or might require a licence, for managing portfolios in securities, futures contracts or both.

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