Hong Kong’s SFC Consults on Allowing Retail Traders to Trade Crypto

Hong Kong’s
Securities and Futures Commission (<a href=”https://www.financemagnates.com/tag/sfc/” target=”_blank” rel=”follow”>SFC</a>) announced on Monday the launch of public
consultation regarding regulating trading platforms for <a href=”https://www.financemagnates.com/terms/c/cryptocurrencies/” class=”terms__main-term” id=”b091101e-6e02-4b36-aa0e-7c972dfdd6ed” target=”_blank”>cryptocurrencies</a> and
digital assets. Interested parties can submit their comments until 31 March
2023.Hong Kong Opens Crypto
Regulation Consultation PeriodStarting
from 1 June 2023, any centralized virtual asset trading platform that conducts business
in Hong Kong or targets Hong Kong investors must obtain a license from the SFC
under a new licensing system. The SFC’s proposed regulatory standards for
virtual asset trading platforms are modeled after the current Securities and
Futures Ordinance regulations and are similar to those for licensed securities
brokers and automated trading venues. Additionally, the SFC has suggested
revisions to some of the existing requirements as part of this initiative.The first information
suggesting that Hong Kong wants to legalize crypto trading and broaden its
status as a prominent financial hub to a digital assets center <a href=”https://www.financemagnates.com/cryptocurrency/hong-kong-set-to-legalize-crypto/” target=”_blank” rel=”follow”>emerged in
October 2022</a>. Although cryptocurrency trading is banned in China, Hong Kong is
taking advantage of its independent status to allow brokers and platforms to
apply for local licenses. During the
consultation period, SFC specifically requests input on whether licensed
platform operators should serve retail traders and what additional measures
should be met to protect individual investors.”As
has been our philosophy since 2018, our proposed requirements for virtual asset
trading platforms include robust measures to protect investors, following the ‘same
business, same risks, same rules’ principle,” Julia Leung, the Chief
Executive Officer at SFC, said. Operators
of cryptocurrency exchanges and platforms wishing to obtain authorization
should start reviewing their control systems to prepare for a smooth
transition. In contrast, according to the SFC, those who do not plan to obtain
a license should begin shutting down their Hong Kong operations in an orderly
manner.”In
light of the recent turmoil and the collapse of some leading crypto trading
platforms around the world, there is clear consensus among regulators globally
for regulation in the virtual asset space to ensure investors are adequately
protected and key risks are effectively managed,” Leung added.Watch the recent FMLS22 panel on forex and crypto trends in 2023.Interactive Brokers
Launches Crypto Services in Hong KongJust a week
before the recent SFC announcement, one of the leading US electronic trading
platforms, Interactive Brokers, decided to expand its crypto offering to the
Asian markets and <a href=”https://www.financemagnates.com/forex/brokers/interactive-brokers-launches-crypto-trading-in-hong-kong/” target=”_blank” rel=”follow”>launched new digital assets trading services in Hong Kong</a>.Although the
offering is currently limited to only two assets: <a href=”https://www.financemagnates.com/terms/b/bitcoin/” class=”terms__secondary-term” id=”261088a9-0f41-4202-a73c-31f75ba6bd93″ target=”_blank”>Bitcoin</a> and Ethereum, Interactive
Brokers did not rule out the possibility of broadening the number of offered
tokens in the foreseeable future. For now,
only professional traders will be able to trade cryptos with Interactive
Brokers in Hong Kong, but the potential change of local regulations, which are the
topic of the newest public consultation, may open up the platform to a large
number of retail customers.”Investor
demand for digital assets continues to grow in Hong Kong and around the world,
and we are pleased to introduce cryptocurrency to address the trading objectives
of clients in this important market,” said Interactive Brokers’ Head of
APAC, David Friedland.After Crypto ETFs, It Is a Time for Crypto TokensBack in
October 2022, one of the Four Asian Tigers <a href=”https://www.financemagnates.com/cryptocurrency/regulation/hong-kong-decides-on-rules-for-crypto-etfs/” target=”_blank” rel=”follow”>was conducting similar consultation</a> focused on allowing retail traders access to crypto exchange-traded funds
(ETFs). These types of instruments are still waiting for regulatory approval in
the US, but are already available in Europe.Only two
months after the publication of the consultation paper, CSOP Asset Management,
an investment advisor based in Hong Kong, <a href=”https://www.financemagnates.com/cryptocurrency/hong-kongs-first-crypto-futures-efts-raise-736m-ahead-of-launch/” target=”_blank” rel=”follow”>launched the first crypto ETFs on the
Hong Kong Stock Exchange</a> (HKEX). CSOP Bitcoin Futures ETF and CSOP Ether Futures
ETF track the standardized, cash-settled Bitcoin futures contracts and Ether
futures contracts traded on the Chicago Mercantile Exchange, respectively.”They
provide investors with exposure to the digital asset space for the first time
in Asia and reflect both our ongoing commitment to, and the market’s appetite
for, the digital economy. We look forward to welcoming more themed ETFs and
more digital asset products to our markets in the months ahead,” Wilfred Yiu,
the Chief Operating Officer and Co-Head of Markets at HKEX, commented.