On May 23, the Hong Kong Securities and Futures Commission (SFC) revealed plans to officially allow the complaint digital assets service providers (DASP) to serve retail investors. The SFC report urged the DASPs seeking to explore new opportunities in Hong Kong to apply for licensing.
Initially, the SFC team had issued regulatory requirements for DASP operating in the Hong Kong market. According to the SFC guidelines, all the virtual assets providers in the region must fully comply with three main requirements.
Will Hong Kong Allow Crypto Exchanges to Serve Retail Investors?
Before lodging the licensing documents, the regulators require the applicant to comply with cybersecurity measures and develop a platform to segregate clients’ assets. The applicant must also satisfy the assets custody safety requirement to obtain the Hong Kong DASP permit.
A recent report from the chief executive of SFC Julia Leung illustrated the need to develop a clear crypto regulatory framework. She explained the benefits of developing a responsible, friendly environment to foster innovation growth.
In a friendly tone, Leung mentioned that Hong Kong had adopted a comprehensive regulatory framework for virtual assets. She added that the existing regulation in the region aimed at protecting the investors from exploitative practices. Leung also noted that the new regulation addresses the risks battling the crypto sector.
Nature of New Crypto Regulation in Hong Kong
According to the SFC update, the new crypto regulation in Hong Kong will become effective from June 2023. Meanwhile, the regulators are considering allowing the DASP in the region to extend their services to retail investors.
Recently the SFC official acknowledged the recipient of roughly 152 written proposals from key players in the crypto industry. In the prior public consultation, the SFC announced plans to adopt stringent measures to safeguard the interest of retail investors.
These measures included developing good governance tools and implementing “suitable” admission criteria and disclosure processes. Also, the regulators plan to implement effective strategies to improve the onboarding process. The proposed measures require the digital tokens to meet the requirement of minimum criteria to prevent retail investors from market manipulation.
Per the proposed measures, retail investors trading using significant cryptos such as Bitcoin and Ethereum will be required to meet the listing requirements.
Commenting on the SFC stance on crypto regulation, an official at OKX Lennix Lai supported the regulator’s decision to allow the crypto trading platform to serve retail investors. He stated that the SFC decision was a significant milestone for Hong Kong to boost the crypto industry’s growth.
Lai observed that some changes in crypto regulation would yield positive outcomes. He stated that eliminating prerequisite requirements for accessing legal advice benefited retail traders.
Nevertheless, the developments to formulate friendly regulations in Hong Kong aim to support the country in establishing a crypto hub in the Asian region.