Hong Kong's Securities Watchdog May Soon Regulate All Crypto Trading Platforms

Hong Kong's government is set to change the rules for cryptocurrency firms operating within the city jurisdiction, according to remarks made Tuesday.

AccessTimeIconNov 3, 2020 at 8:47 a.m. UTC
Updated Sep 14, 2021 at 10:26 a.m. UTC

Hong Kong's government is seeking to change the rules for cryptocurrency trading firms operating or offering services within the city jurisdiction.

A new consultation paper detailed by Clara Chiu, director of licensing at the Securities and Futures Commission (SFC), in a keynote speech at Hong Kong FinTech Week 2020 on Tuesday, will propose the SFC be given expanded regulatory oversight over all "centralized virtual asset trading platforms" in Hong Kong.

This will be regardless of whether they provide access to tokens considered to be securities or solely cryptocurrencies like bitcoin.

The SFC implemented regulatory guidance in 2019 that sought to treat digital asset firms trading at least one security token under the same rules as securities brokerages, but signing up with the regulator was voluntary.

"Under the current legislative framework if a platform operator is really determined to operate completely off the regulatory radar it can do so simply by ensuring that its traded crypto assets are not within the legal definition of a security," said Ashley Alder, CEO of the SFC in a speech also on Tuesday, Reuters reports.

That is now set to change in line with guidance from the Financial Action Task Force (FATF), Chiu said, with all cryptocurrency trading platforms proposed to apply for an SFC license under the city's anti-money laundering (AML) legislation.

As a FATF member, Hong Kong is "under an obligation" to align with the AML standards for virtual asset service providers, she added.

If serious breaches are committed on the platforms, such as market manipulation, "there will be intervention and restriction on their business," according to Chiu.

Crypto platforms will initially only be allowed serve professional investors under the proposed regime, and will have to maintain high levels of investor protection and security, she said.

The proposal will not change the existing scenario for platforms now operating under the security token regime.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.

Read more about