Hong Kong joined the growing number of countries imposing cryptocurrency regulations today, when it announced new laws for fund managers and cryptocurrency exchanges. Hong Kong has been home to some of the world’s biggest cryptocurrency entities such as Binance, BitMEX, and OkEx, organizations that have had to react swiftly to China’s cryptocurrency restrictions. The Securities and Futures Commission announced a potential crackdown in February, stating that it would “…police the market and enforce where necessary” in a sign it was embarking upon regulations, which it has now revealed.
Light Touch Approach
Hong Kong’s new regulations will focus mainly on fund managers, with licenses required for any that invest more than 10 percent of their portfolio in the asset class. Exchanges that deal with solely professional investors can also opt to move into a ‘sandbox’, where more freedom in investment practice is allowed, subject to anti-money laundering and other rules. Exchanges that join the sandbox will be monitored to assess their risk-handling and compliance, after which they may be able to apply for a license.
A Measured Response
Fears were raised when the SFC announced their intention to regulate in February. With China’s opinion on the subject of cryptocurrencies well-known, it was no surprise that Hong Kong would soon follow suit, particularly with cryptocurrency trading growing in popularity on the island. It is therefore a welcome relief that the SFC is willing to work with investment funds and exchanges rather than banning them outright. This reflects a more measured response and a seeming desire for Hong Kong to make the most of this new asset class.
Like all regulators, the SFC will have to tread the line between protecting customers and not stifling innovation, but this initial framework seems to show that Hong Kong is willing at least to give cryptocurrency a chance to flourish.
