Hong Kong regulator to issue crypto licenses with safeguards for retail investors

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[1/2] The Hong Kong skyline is pictured from Victoria Peak in Hong Kong, China January 2, 2020. REUTERS/Navesh Chitrakar

HONG KONG, May 23 (Reuters) – Hong Kong’s securities regulator said its crypto licensing regime will include measures to protect retail investors as it introduces stricter rules for digital asset companies to from June 1.

Hong Kong’s decision to allow retail trading of cryptocurrencies came after a year of turmoil in the industry, with the collapse of crypto exchange FTX last year being a blow.

The new regime requires all trading platforms and exchanges to apply for a license, failing which fines and jail time would follow.

Traders must also perform customer checks to ensure that retail traders from China, where crypto trading is banned, will not be accepted, said Keith Choi, acting head of intermediaries at Securities and Exchange. Futures Commission (SFC) at a press conference on Tuesday.

“Operators have a responsibility to comply with laws and regulations in the jurisdictions in which they provide services,” he said.

The SFC has concluded a February consultation on digital asset trading, which offers various measures to protect investors. A total of 152 submissions were received.

The measures include requiring companies to set an exposure limit for retail investors and only allowing retail trading of highly liquid tokens that have been issued for at least a year.

The new system also covers the marketing of services from unlicensed platforms.

“It is an offense to post an advertisement related to an unlicensed platform, this would cover (social media influencers) personally promoting the services of (these platforms) to Hong Kong investors,” said Elizabeth Wong, head of the SFC’s fintech unit.

The International Organization of Securities Commissions (IOSCO) unveiled the world’s first approach to crypto-asset regulation on Monday, as the collapse of the FTX exchange last year fueled fears that consumers could be not protected.

Still, some investors are undeterred, as bitcoin has since recovered 75% to $27,431 on Tuesday. It has hovered above $26,000 since the banking turmoil in the US and Europe in March.

The SFC will begin accepting applications from June 1.

Reporting by Georgina Lee, editing by Louise Heavens

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