Hong Kong opens public consultation on new crypto trading regime

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(Kitco News) – Hong Kong is preparing legislation to allow trading in digital assets, including by individual investors. On Monday, the Hong Kong Special Administrative Region of the People’s Republic of China (HKSAR) announced that the Securities and Futures Commission (SFC) had launched a public consultation on requirements for operators of virtual asset trading platforms.

The announcement confirms reports that circulated late last week that the Hong Kong SAR was preparing crypto legislation to be enacted this year. Under the new licensing regime due to come into effect on June 1, 2023, all centralized virtual asset trading platforms operating in Hong Kong or actively marketing to Hong Kong investors will need to be licensed by the SFC.

The SFC said the proposed regulatory requirements for virtual asset trading platforms are based on those of the existing regime of the Securities and Futures Ordinance and are comparable to those for securities brokers. licensed and automated trading platforms. The SFC is also proposing changes to certain requirements of the existing regime.

As part of the consultation, the SFC is particularly interested in knowing whether to allow licensed platform operators to serve retail investors and, if so, what measures should be implemented, they wrote.

As has been our philosophy since 2018, our proposed requirements for virtual asset trading platforms include strong measures to protect investors, following the same business principle, same risks, same rules, said Julia Leung. , CEO of SFC. In light of the recent turmoil and collapse of some of the world’s leading crypto trading platforms, there is a clear consensus among regulators around the world for regulation of the virtual asset space to ensure that investors are properly protected and that the main risks are effectively managed.

The SFC said operators of new and pre-existing virtual asset trading platforms who plan to apply for a license should start reviewing and revising their systems and controls to prepare for the new regime, while those who do not plan to not applying for a license should start preparing for an orderly closure of their business in Hong Kong.

The SFC added that it will post listings on its website to inform the public of the different regulatory statuses of different trading platforms, and that it intends to continue working with the Investor and Financial Education Council to educate the Hong Kong public on virtual assets. Interested parties to share their views and expertise on regulators’ requirements have until March 31, 2023.

Shortly after the announcement, Justin Sun, who recently took over Huobi, China’s largest crypto platform, tweeted that his exchange intended to apply for a license.

Big news for crypto today: @HuobiGlobal has announced that they are applying for a Hong Kong crypto trading license! This is a major milestone for the leading cryptocurrency exchange and a sign of its continued commitment to operating in a compliant and regulated manner.

— HE Justin Sun (@justinsuntron) February 20, 2023

Sun added that Huobi also plans to launch a new exchange called Huobi Hong Kong, which will be fully compliant with local regulations and will offer a range of trading pairs and services to clients and will focus on providing trading services to institutional investors. and high net worth individuals in Hong Kong. It positions the exchange as a reliable and secure platform for large investors in Asia looking to enter the crypto market, he said.

On February 15, Twitter user NoodleofBinance first tweeted the news that Hong Kong was preparing to legalize crypto trading for institutions and its citizens. Expect a huge influx of money from the East, NoodleofBinance said. Under current rules, crypto trading in Hong Kong is limited to professional investors, which are defined as people with a portfolio of at least HK$8 million (US$1.02 million).

The crypto proponent also wrote that the Asian currency-based stablecoin exiting HK will also be a certainty, and the US dollar stablecoin will no longer be the only one. [token] in the city. They envision a future where investors can trade multiple stablecoin currency pairs and there will be tons of arbitrage opportunities, similar to what was seen in the 2017 bull market when the BTC/CNY pair allowed people to make a fortune by arbitrating the Yuan pair and the US dollar pairs.

Coinbase CEO Brian Armstrong responded to NoodleofBinance’s tweets warning that the US risks falling behind in the blockchain race due to its lack of clear regulation and failure to pass meaningful legislation.

America risks losing its status as a long-term financial hub, without clear crypto regulations and a hostile environment from regulators, Armstrong said. Congress should move quickly to pass clear legislation. Crypto is open to everyone around the world and more are on the way. EU, UK and now HK.

On February 13, DBS Group, Singapore’s largest bank, also revealed that it plans to apply for a license that would allow it to offer crypto services to Hong Kong residents.

The possibility of Hong Kong citizens gaining access to crypto trading has been a hot topic of discussion and speculation for months, ever since the government first announced it was exploring the topic in October.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. This is not a solicitation to trade commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for loss and/or damage resulting from the use of this publication.

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