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Hong Kong Regulator Announces New Plans for Cryptocurrency Industry

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The Securities and Futures Commission of Hong Kong has announced new plans to regulate the cryptocurrency industry. The regulator issued two circulars on Thursday outlining new rules for crypto exchanges as well as crypto asset portfolio managers, intermediaries, and fund distributors.

The Hong Kong Securities and Futures Commission (SFC) issued two circulars on Thursday concerning cryptocurrency regulations. The first outlines "a new approach which aims to bring virtual asset portfolio managers and distributors of virtual asset funds under its regulatory net," the commission wrote. It also "sets out a conceptual framework for the potential regulation of virtual asset trading platforms." The second document addresses intermediaries that distribute crypto funds.

Hong Kong Regulator Announces New Plans for Cryptocurrency IndustryThe SFC defines a virtual asset as "a digital representation of value, which is also known as 'cryptocurrency', 'crypto-asset' or 'digital token'."

Citing "significant risks virtual assets pose to investors," the commission announced that it will "adopt new measures within its regulatory remit," elaborating:

The SFC will impose licensing conditions on firms which manage or intend to manage portfolios investing in virtual assets.

In addition, the regulator noted that it will explore whether crypto exchanges "are suitable for regulation in the SFC regulatory sandbox."

Risks Under Existing Law

In the first document, the securities watchdog expressed concern over "the growing investor interest in gaining exposure to virtual assets via funds and unlicensed trading platform operators in Hong Kong." The SFC explained that investors are not protected since the Securities and Futures Ordinance (SFO) currently does not apply to unregulated exchanges or portfolio managers, adding:


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