Hong Kong’s Securities and Futures Commission (SFC) has introduced a new framework to regulate the digital asset exchanges operating under its jurisdiction.
Hong Kong is the base of many major cryptocurrency exchanges, but they are currently not regulated by the financial regulator, as digital assets do not fall under the category of securities.
This also allows fraudulent entities to dupe investors without the scrutiny of a regulatory agency.
The regulator of the Chinese autonomous region first announced its plans to bring regulations for the digital asset exchanges last year at Hong Kong’s 2018 Fintech Week and introduced a “sandbox” to study and encourage such technology companies.
Addressing the key concerns in the sector
The new regulatory laws will cover aspects like custody, know-your-customer requirements, anti-money laundering rules, and market manipulation, some of the key concerns for the crypto industry.
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“Regulators need to be open to the benefits of innovation, but they should also be ready to tackle the risks to investors which some financial technologies give rise to,” SFC’s CEO Ashley Alder said. “We have decided to move ahead with this new regulatory framework because it is clearly in the public interest to enable investors to choose to participate in properly regulated virtual asset trading platforms.”
The approach by the regulator is also welcomed by market players in the region.
In an official statement, BC Group, a technology and digital asset trading company operating from Hong Kong, noted: “The announced licensing framework will bring much-needed clarity to the digital asset sector, and will accelerate acceptance of digital assets as a new class of financial instruments in Hong Kong and the region.”
The framework, however, will be “opt-in” for the exchanges, meaning it will not be imposed on them.
Meanwhile, Reuters recently revealed that the Hong Kong watchdog is reluctant to distribute licenses to the crypto funds operating from the region.