Hong Kong Regulator Approves Retail Trading of Cryptocurrencies, Sets Stringent Rules for Licensed Exchanges

Hong Kong’s Securities and Futures Commission (SFC) has announced the finalization of rules that will permit retail trading of cryptocurrencies starting from June 1. This move is seen as a significant step in Hong Kong’s ambition to establish itself as a leading hub for virtual assets. The newly established rules will allow licensed exchanges to offer cryptocurrencies with high liquidity and large market capitalization, including bitcoin and ether, to retail investors. Interested platforms can begin applying for a license on June 1, and the SFC has urged those not planning to do so to close their businesses in Hong Kong in an orderly manner.

During a press briefing, the regulator revealed that it has yet to approve any cryptocurrency trading platforms for retail investors. However, it anticipates that licensed firms will start accepting retail traders in the latter half of this year. In an effort to crack down on unlicensed cryptocurrency exchanges, serving advertisements for such platforms will become a criminal offense starting next month. This ban will also encompass key opinion leaders who promote unlicensed exchanges. Additionally, the use of fraudulent or reckless means to induce others to acquire virtual assets will be deemed illegal.

Hong Kong’s regulatory framework for cryptocurrencies comes at a time when the city aims to position itself as a global hub for Web3 technology. Despite the growing concerns of other governments regarding virtual assets, Hong Kong officials are committed to providing adequate safeguards to prevent the industry from experiencing the kind of meltdowns witnessed in the past, such as the bankruptcy of FTX, a former major cryptocurrency exchange.

Eddie Yue Wai-man, Chief Executive of the Hong Kong Monetary Authority (HKMA), emphasized the importance of stringent regulations while allowing room for industry development and innovation. Yue stated that the goal is to create an exciting ecosystem, but this does not imply a light-touch regulatory approach. Participants who find the regulations overly stringent are encouraged to seek opportunities elsewhere.

Licensed virtual-asset platforms in Hong Kong will be required to meet a comprehensive set of requirements, including secure asset custody, client asset segregation, conflict of interest avoidance, and cybersecurity standards. Exchanges will be expected to conduct a thorough assessment of investors’ understanding of virtual assets’ nature and risks, as well as their risk tolerance, and establish exposure limits. Furthermore, licensed platforms should establish a “token admission and review committee” responsible for governing the cryptocurrency tokens they offer. The SFC stipulates that tokens available to retail investors must be included in at least two acceptable, investible indices provided by independent entities, including one with expertise in traditional finance.

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Crypto Stats

CryptoCurrencyUSDChange 1hChange 24hChange 7d
Bitcoin40,601 0.35 % 2.98 % 8.29 %
Ethereum2,210.7 0.46 % 1.98 % 7.14 %
Tether1.000 0.07 % 0.04 % 0.06 %
BNB229.21 0.07 % 0.47 % 0.75 %
XRP0.6294 0.20 % 1.54 % 2.70 %
Solana63.95 1.02 % 1.57 % 11.65 %
USDC1.000 0.05 % 0.19 % 0.03 %
? --- 0.00 % 0.00 %
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