Crypto RegulationNEWS

Hong Kong’s best regulators get inquiries about digital assets before the start of trading

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Financial services providers in Hong Kong are acting swiftly to lay the groundwork for their retail customers to be able to trade digital assets in the coming months as a result of a substantial amendment to local law.

Brokers and fund managers get ready for trading in digital assets

A modification to the Anti-Money Laundering and Counter-Terrorist Financing Act was approved by the Legislative Council last month. As of June this year, it will bring virtual-asset service providers under the purview of the Securities and Futures {SFC}.

In contrast to the existing rule that only professional investors or those with at least HK$8 million {US$1.03 million} in bankable assets be allowed to do so, the SFC is planning to produce a consultation paper on how to open up trading in virtual assets to retail investors. Local financial services providers now have the opportunity to contact more consumer investors.

The revision has given Hong Kong’s desire to strengthen its position as a regional hub momentum in light of the rise in demand for virtual assets. Despite worries expressed following the demise of the FTX crypto, the city is deploying cutting-edge financial technology because it is sure that virtual assets will continue to play a crucial role in promoting economic growth.

Initiators of the services will be Victory Securities and Interactive Brokers

Brokers are not required to possess additional licenses to offer their clients trading services for exchange-traded funds based on bitcoin and ether listed on the Hong Kong Stock Exchange. According to Robert Lui, a digital asset leader at Deloitte Hong Kong, enterprises must obtain additional SFC approval to offer active trading in virtual assets like cryptos and related futures products.

GEM-listed Victory Securities and Interactive Brokers are the first two brokerage firms in the city to get SFC approval to trade virtual assets, however only for professional customers.

According to Kennix Chan, executive director of Victory Securities, preventing small-scale investors from trading virtual assets may force them to use unregulated platforms outside the local jurisdiction, putting them in danger.

As per Karen Man, a partner in Baker McKenzie’s Hong Kong financial services regulatory practice, the rules must be understood by intermediaries who intend to engage in virtual asset trading.

She reviewed their business contracts, processes, and procedures and advised them on selecting the best business associates and service suppliers.

She claims that the SFC is among the pioneers in creating a comprehensive regulatory framework for monitoring virtual asset trading platforms. Custody of client assets, cybersecurity, market surveillance, and risk management are all covered by this framework.

However, the virtual asset regulation framework has received plaudits from the Hong Kong Investment Funds Association {HKIFA}, the city’s fund houses trade group, for broadening the asset classes accessible to regional mutual funds.

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