Reports on Monday indicate that Hong Kong regulatory authorities are going to be cracking down on cryptocurrency products in the coming months. According to a report by Japanese outlet Nikkei, the Hong Kong Securities and Futures Commission (SFC) will be implementing a new licensing regime.
Those rules will mean that, if cryptocurrencies make up more than 10 percent of a firm’s holdings, they will have to obtain a specific license from the SFC.
More damagingly, at least from the perspective of those in the cryptocurrency industry, these firms will only be able to sell cryptocurrency products to professional investors.
The new rules, which are set to be rolled out in several stages, also put prohibitions on the ability of firms to launch initial coin offerings (ICOs).
For example, a token must have been in existence for 12 months prior to its launch via an ICO. Quite how that will work in practice when the purpose of an ICO is usually to launch a token, is unclear.
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SFC – Not Like Its Fellow Regulators on the Mainland
Although regulators have, by and large, taken a haphazard approach to regulating cryptocurrencies, most have put ICOs under greater scrutiny.
The reason for this is, as our readers are likely aware, is that the process has been used repeatedly to scam investors.
In contrast to mainland China which has slapped bans on many parts of the industry’s activities, Hong Kong as a whole has been fairly lax in imposing rules on cryptocurrency firms.
Last month the SFC did, however, issue two circulars that put both cryptocurrency exchanges and investment funds under their purview.
But unlike regulatory authorities in mainland China, the SFC does not seem intent on banning, or even wiping out, the industry wholesale. Instead, its regulations seem aimed at fostering innovation and weeding out any fraudsters.