Hong Kong’s regulator proposed a relaxation of rules banning retail investors from buying crypto tokens from licensed platforms on Monday. The prohibition had been the source of debate in the city’s legislature, with lawmakers last year pushing the regulator to relax the rules because investors were already using offshore and unregulated platforms such as FTX to place trades.
The regulator also announced all crypto trading platforms operating in Hong Kong need to be approved by the Securities and Futures Commission by June 2024, or else close down its operations. The SFC “will not hesitate to take enforcement action,” the regulator suggested in a new consultation. According to an SFC spokeswoman, Hong Kong platforms are expected to list Bitcoin and Ether, the two largest digital assets by market value. As part of a larger initiative to reestablish the city’s credentials as a financial center, Hong Kong switched to a pro-crypto attitude at the end of October last year.
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To develop a required regulatory framework that can attract businesses and safeguard investors, officials are hoping to draw lessons from last year’s $1.5 trillion digital asset crash and a wave of worldwide bankruptcies, including the collapse of the FTX exchange. Exchange-traded funds (ETFs) trading in Bitcoin and Ether futures from CME Group (NASDAQ: CME ) are already permitted by the government, and this month saw the sale of the first-ever digital green bonds.
New rules for crypto trading platform In other news, the Securities and Futures Commission (SFC) of Hong Kong released its draft regulations for virtual asset trading platforms on Monday and is now accepting public feedback. Any cryptocurrency trading platforms, including those that already exist, that want to apply for a license under the new regime “should begin to assess and adapt their systems and procedures to prepare for the new regime,” the notice stated.
The government has been behind changes to the city’s crypto licensing rules with officials keen to position Hong Kong as a financial center for digital assets. The city’s central bank only last week issued the world’s first tokenized green bond, raising around $100 million to invest in clean energy technology and related projects. Hong Kong last year announced new mandatory licensing provisions for centralized crypto service providers, which come into effect on June 1. The SFC said Monday it was looking “to strike a better balance between investor protection and market development.”
Industry and experts can weigh in on the new policies until March 31. The regulator also suggested that only the largest tokens will be available for retail traders. The consultation covers token admission requirements and outlines that “eligible large-cap virtual assets” need to fulfil certain market criteria issued by at least two independent index-providers.
