Hong Kong ’s monetary regulator printed new guidelines on Wednesday that may enable crypto exchanges to obtain an working license, a step meant to enhance regulation and requirements and assist forestall fraud.
Market watchdogs have been debating whether or not and the way they need to regulate the cryptocurrency trade since Fb’s plans to launch its Libra digital foreign money brought on a lot of them to broaden their give attention to digital property past investor safety issues.
Hong Kong hosts dozens of cryptocurrency exchanges, additionally referred to as digital asset buying and selling platforms, together with a number of the world’s largest.
Ashley Alder, chief government of Hong Kong’s Securities and Futures Fee (SFC), stated such exchanges had largely escaped regulation till now as a result of a lot of the digital property traded on their platforms weren’t technically securities.
“After an in-depth examination of their unique technical and operational features, we concluded that some could be regulated by us,” Alder stated in a speech earlier than the SFC printed its new laws.
Some cryptocurrency exchanges in Hong Kong and elsewhere say they welcome regulation as it could enhance requirements and permit licensed exchanges to distinguish themselves from unlicensed opponents. Others desire to function additional underneath the radar.
The brand new guidelines, underneath which exchanges can apply to be regulated from Wednesday, draw on the requirements the SFC expects for typical securities brokers.
They stipulate that an exchange that wishes to be licensed should present companies to skilled traders solely, have an insurance coverage coverage to guard purchasers in case property are misplaced or stolen, and use an exterior market surveillance mechanism.
Crypto exchanges don’t want an SFC license to function supplied they don’t commerce any merchandise outlined as a safety. Bitcoin for instance just isn’t a safety, Alder stated.
Final 12 months, Alder introduced a brand new framework that may enable asset managers investing in digital property and promoting merchandise in Hong Kong to obtain an SFC license. Hardly any have been capable of meet the SFC’s necessities.
In a separate assertion on Wednesday, the SFC warned traders about buying bitcoin futures in Hong Kong. Alder stated in his speech that exchanges permitting buying and selling of such merchandise “may well be conducting an illegal activity”.