Hong Kong SFC Begins Consultation Over Crypto Trading Regulation

• Virtual assets trading platforms operating in Hong Kong must be licensed from June 1, 2023.
• SFC has launched a consultation allowing operators to contribute to the regulatory framework.
• All contributions must be submitted before March 31, 2023.

Beginning on June 1, 2023, all centralized virtual assets trading platforms operating in Hong Kong must do so with a license from the Hong Kong Securities and Futures Commission (SFC). In line with this, the commission has launched a consultation allowing operators within the sector to contribute toward the final regulatory framework.

As published on its website, the Hong Kong SFC has asked interested contributors to submit their comments before March 31, 2023. The Hong Kong SFC requested all participants in the exercise to submit the names of the organizations that they represent making submissions. It asked commenters who wish to remain anonymous to specify, since the commission may publish the details of the contributions on its website at a later date.

The current proposal over virtual assets trading platforms complies with the existing regime under the Securities and Futures Ordinance in Hong Kong. It compares with the same license issued to securities brokers and automated trading venues but with minimal adjustments.

The Hong Kong SFC plans to extend the proposed regulation such that licensed platforms can serve retail investors. It will combine the new laws with existing measures that protect investors, including client onboarding and token admission.

Hong Kong SFC’s Chief Executive Officer, Ms. Julia Leung, noted that the commission’s proposed regulation complies with the global consensus among regulators, in line with the recent turmoil and the collapse of some leading crypto trading platforms. According to her, the aim of the regulation is “to ensure investors’ protection and key risks effectively managed.”

The new regulation will cover both new and existing virtual assets trading platforms. The Hong Kong SFC advised the trading platforms, especially the pre-existing ones, to revise their systems and controls in preparation for the new regime. The commission also asked any operator unwilling to comply with the proposed change to prepare for an orderly closure of its business in Hong Kong.

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