Hong Kong authorities have made quite a few moves in terms of cryptocurrency regulations. Back in 2018, the Securities and Futures Commission (SFC) proposed the very first guidelines called “guidance on regulatory standards.”
The laws were appropriate for any crypto fund manager who invests more than 10 per cent of their holdings in crypto, with a system meant to serve professional traders exclusively and enable them to join a sandbox scheme designed to give more room to develop new products and services. Everyone else would be required to inform SFC about their business practices to be able to gain a license.
The Statement mentioned:
“In order to afford better protection to investors, the SFC considers that all licensed portfolio managers intending to invest in virtual assets should observe essentially the same regulatory requirements even if the portfolios (or portions of portfolios) under their management invest solely or partially in virtual assets, irrespective of whether these virtual assets amount to ‘securities’ or ‘futures contracts.’”
The strictness of the guidelines resulted in very few approvals, a Reuters report states. In fact reporters were only able to identify one licensee. Hong Kong based Diginex, operator of a cryptocurrency fund is reported to have received the approval for a license back in June. Gaven Chong, a partner in law firm Simmons & Simmons, which advised Diginex on its SFC application, said:
“Last year there was a lot of excitement but since then we haven’t seen much activity. Not many new managers in this area have the background, experience or support to mount such an undertaking and this has meant that many applications never even get started.”
The most recent reports state that the Hong Kong regulators will be publishing a fresh set of regulations for Cryptocurrency exchanges and Bitcoin (BTC) today. The news was announced by Ashley Alder, Chief Executive of the SFC.
The new guidelines will clarify how exchanges handle custody and compliances such as Know Your Customer (KYC) and Anti-money Laundering policies (AML) among various issues. Talking about the guidelines he announced last year, Alder explained that since then:
“We met with a large number of crypto platform operators to see … whether some platforms were in fact capable of operating in a regulated environment. After an in-depth examination of their unique technical and operational features, we concluded that some could be regulated by us.”
He further added:
“The framework will enable virtual asset trading platforms to be regulated by the SFC, a major development which builds on a way forward […]”
He also mentioned that a second statement issued by the SFC would focus on the risk of cryptocurrency futures trading. He warned that any business that offers such services “may well be conducting an illegal activity” as per Hong Kong laws.
From here on, Exchanges can apply to be regulated from Monday.