Crypto Regulations Unveiled: Hong Kong’s Path To Secure & Responsible Trading

In a move to regulate the burgeoning crypto market, the Hong Kong Securities and Futures Commission (SFC) has released its Consultation Conclusions on the Proposed Regulatory Requirements for Virtual Asset Trading Platform Operators.


According to the press release, the guidelines, set to become effective on June 1, 2023, aim to provide robust investor protection and manage key risks in the virtual asset trading industry.

During the consultation period, the SFC received an impressive 152 written submissions from various industry stakeholders. While the majority of respondents welcomed the proposed requirements, several sought clarifications on certain aspects.

Taking into account the wide-ranging comments and suggestions, the SFC has made modifications and clarifications to address these concerns.

One significant change is the allowance for licensed crypto trading platform operators to serve retail investors. However, stringent measures will be implemented to protect these investors, including suitability assessments during onboarding, enhanced token due diligence, and increased disclosures.

The SFC emphasizes that clear regulatory expectations are vital for fostering responsible development in the virtual asset sector.

The guidelines cover a range of requirements, including safe custody of assets, segregation of client assets, avoidance of conflicts of interest, and cybersecurity standards.

Operators of virtual asset trading platforms are encouraged to apply for a license if they are willing to comply with these standards. However, those who do not plan to do so are expected to cease their operations in Hong Kong in an orderly manner.


Warning Against Unregulated Crypto Platforms

It is important to note that the SFC has not yet approved any virtual asset trading platform to provide services to retail investors. Despite the forthcoming regulatory regime, most platforms accessible to the public remain unregulated by the SFC.

To mitigate risks, the SFC will continue its efforts to educate investors about the dangers of trading on unregulated platforms, as per the release statement.

Ms. Julia Leung, the SFC’s Chief Executive Officer, believes that Hong Kong’s comprehensive virtual asset regulatory framework, based on the principle of “same business, same risks, same rules,” will enable sustainable industry development and support innovation.

However, to provide further guidance and information, the SFC will publish additional details, including license application procedures and transitional arrangements.

On May 25, 2023, the SFC will gazette the guidelines and application forms, officially signaling the next phase of regulation in Hong Kong’s virtual asset trading market.

Nevertheless, the new guidelines mark a significant step toward creating a secure and responsible environment for crypto trading platform operators and investors.