Hong Kong Unveils Crypto Rulebook: Will Allow Retail

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Neither the author, Ruholamin Haqshanas, nor this website, The Tokenist, provides financial advice. Please review our website policy before making any financial decisions.

Hong Kong’s securities watchdog has concluded its consultation paper on the proposed regulatory regime for crypto trading platforms. As part of its new regulations, the city-state will allow retail investors to trade certain cryptocurrencies using licensed platforms starting next month.

Hong Kong publishes the conclusions of its consultation document

Hong Kong’s Securities and Futures Commission (SFC) released a consultation paper on its proposed regulatory regime for crypto trading platforms in January. The new rules are expected to come into effect from June and require all crypto platforms to be authorized by the SFC.

In addition, the new regulatory regime proposed to allow retail investors in the city to trade specific large-cap tokens on licensed exchanges, given that safeguards such as knowledge tests, risk profiles and reasonable exposure limits are in place.

On Tuesday, the watchdog detailed the findings of the consultation paper. The SFC said it received 152 written submissions from industry and trade associations, professional and consulting firms, market participants, licensed companies, individuals and other stakeholders.

“Respondents generally welcomed the proposed requirements, while a number asked for clarification. Based on the many comments and suggestions provided by respondents, the SFC has modified or clarified some of the proposed requirements. »

Hong Kong will allow retail investors to trade cryptocurrencies

The SFC said a “significant majority” of respondents agreed with the proposal to allow retail investors to trade certain crypto assets. Coins must be included in at least two acceptable investment indices from independent vendors, one with experience in the traditional financial sector.

The agency also retained a plan to provide licenses to crypto exchanges. However, he noted that licensed platforms should comply with a series of robust investor protection measures covering onboarding, governance, disclosure and due diligence and admission of tokens, before providing services. trading to retail investors.

Additionally, the regulations require crypto exchanges to always have a minimum capital of HK$5 million ($640.00) and submit a report at the end of each month containing the platform’s liquid capital availability, bank loans, advances, credit facilities, and profit and loss analysis to SFC.

“Operators of virtual asset trading platforms who are prepared to comply with SFC standards are urged to apply for a license. Those who do not plan to do so should proceed with an orderly shutdown of their business in Hong Kong.”

It should be noted that the guidelines prohibit crypto “gifts” designed to induce retail investment. This clause will likely include airdrops, a marketing strategy used by blockchain-based projects that involve distributing free tokens to investors.

Hong Kong pushes for Web3 amid global crackdown

Hong Kong’s new regulatory regime comes as the city pushes for Web3 and blockchain to position itself as a digital innovation hub in Asia. In contrast, regulators in other parts of the world have launched an aggressive crackdown on the crypto industry.

Recently, Malaysia ordered Huobi Global to cease operations after failing to register to operate in the country. According to an official statement, the company has been asked to deactivate its website and mobile apps on Apple Store and Google Play.

In another case, the Philippines Securities and Exchange Commission warned investors that Gemini is operating its new derivatives exchange without regulatory approval in the country.

Likewise, regulators in the United States, particularly the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), have cracked down on crypto since the collapse of FTX. Agencies have taken enforcement action against Bittrex, Nexo, Binance, Coinbase, and Kraken, among others.

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About the Author

Ruholamin Haqshanas is an accomplished crypto and finance journalist with over two years of writing experience in the field. He has a strong understanding of various segments of the FinTech space, including the decentralized iteration of financial systems (DeFi) and the emerging non-fungible token (NFT) market. He is an active user of digital assets for remittances.

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