Nirav Gala

I work with xHUB, a UK FCA regulated liqudity provider for crypto as their Head of BD

Hong Kong’s SFC proposes a creative way to regulate the wild west of cryptocurrencies

“selective focus photo of Bitcoin near monitor” by Andre Francois on Unsplash

Hong Kong’s Securities and Futures Commission (SFC) has surprised the crypto community by finding a creative way to regulate the wild west of cryptocurrencies in Hong Kong.

Here are the Key Takeaways from SFC’s “Statement on the regulatory framework for virtual asset portfolios managers, fund distributors and trading platform operators.”

  • Funds investing solely in virtual assets that do not constitute securities need not be licensed by SFC.
  • However, the distributors of funds that invest in virtual assets need to obtain Type 1 regulated activity license from SFC. These distributors also need to conduct strict due diligence as per SFC guidelines on unlicensed virtual asset funds before recommending them to investors.
  • Existing licensed Asset Managers (Type 9 regulated activity) who invest 10% or more of gross asset value in virtual assets will now subject SFC’s oversight for virtual asset investments as well.
  • Only professional investors will we allowed to invest in the virtual asset funds.
  • Crypto Exchanges can now opt-in to be regulated by SFC by applying to be a part of the SFC sandbox.

These announcements are welcome as they provide much-needed legitimacy to the investment activity around cryptocurrencies. Regulation and professionalisation of the industry will foster the growth of crypto assets as an asset class. It will also enable existing licenced intermediaries to offer virtual assets as an investment option to their clients.

Full text of the circular can be found here

https://www.sfc.hk/edistributionWeb/gateway/EN/circular/openAppendix?refNo=18EC78&appendix=0

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