Many countries around the globe have changed their stance on cryptocurrencies in recent times, and most of it has been thanks to streamlined and better crypto regulations. The latest country to join the bandwagon is Hong Kong, with reports coming in that the native financial regulator publishing rules on November 6 that would allow cryptocurrency exchanges to receive an operating license.
This new decision was made to bring about improvements in the standards and regulations in the fintech space with the end goal of preventing fraudulent activities. Ashley Alder, chief executive of Hong Kong’s Securities and Futures Commission, stated:
“After an in-depth examination of their unique technical and operational features, we concluded that some could be regulated by us.”
The latest update in the Hong Kong cryptocurrency space has met with divided sentiments, with some claiming that it is a landmark decision while some cryptocurrency exchanges have said that they prefer to operate under our own banners.
The new rules state that a cryptocurrency exchange that needs to be regulated and licensed must align with only professional investors. To ensure that the clients do not receive any legal ramifications later, the exchanges are also required to have inbuilt insurance policies with the added feature of using a mechanism that will track external markets.
Another caveat in the new regulation list is that exchanged need not necessarily have the SFC license if they are not dealing with any products that are defined as ‘securities.’ This opens doors for Bitcoin trade as the world’s largest cryptocurrency is not considered a security.
Currently, there are no regulations that will force exchanges to come under the SFC, and the new law is being considered to do the same. Despite that, the SFC official’s comments were also hailed by Hugh Madden. The chief executive of BC Group who opined:
“Ashley Alder’s announcement of a regulatory framework for digital asset trading platforms is a seminal moment for financial services in Asia and points to increased acceptance of digital assets as new type of financial instruments.”
The position paper released by the SFC was titled the ‘Regulation of virtual asset trading platforms” and had rules and regulations that followed state guidelines as well as global guidelines. The body also wanted to assure organizations that come under the SFC’s wing did not mean that they were ceding control of the assets to the regulatory authorities. Clause number 6 stated:
“The SFC would also like to make clear that, even if the SFC licenses and supervises a virtual asset trading platform, the virtual assets traded on the platform are not subject to the authorisation or prospectus registration provisions that apply to traditional offerings of “securities” or “collective investment schemes”. There are no other mandatory disclosure requirements applicable to an offer of non-security virtual assets in Hong Kong.”
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