Hong Kong's Securities and Futures Commission (SFC) is set to impose stricter regulations on digital asset companies operating within its borders starting June 1, Reuters tells us in a report.
The shift comes as Hong Kong aims to protect retail investors and bring order to the rapidly expanding crypto industry following the 2022 collapse of crypto platform FTX.
A Closer Look at the New Regulations
All trading platforms and exchanges will be required to acquire a license under the new regulations; failure to do so may result in fines and possible imprisonment for the operators.
Additionally, operators must conduct thorough checks on their clients to ensure compliance with the ban on accepting retail traders from China, where crypto trading is prohibited.
Establishing Safer Crypto Environments
Keith Choi, interim director of intermediaries at the SFC, emphasized the significance of operators abiding by the laws and rules of the jurisdictions in which they operate. This initiative seeks to create a secure environment for investors and prevent illegal activity in the cryptocurrency space.
The SFC recently concluded a consultation on digital asset trading, receiving 152 submissions. Consequently, various measures have been proposed to enhance investor protection.
One such measure involves setting an exposure limit for retail investors. In contrast, retail trading will only be permitted for highly liquid tokens that have been in circulation for at least one year.
These measures minimize risks associated with highly volatile and less established cryptocurrencies.
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Moreover, the new regulatory system will tackle the issue of unlicensed platforms marketing their services. Elizabeth Wong, head of the SFC's fintech unit, emphasized that promoting services of unlicensed platforms through advertisements, including those endorsed by social media influencers targeting Hong Kong investors, will be deemed an offense.
Global Crypto Regulation
Hong Kong's SFC is aligning its efforts with the global trend of regulating the crypto industry.
The International Organization of Securities Commissions (IOSCO) recently introduced the first worldwide standard for holding crypto assets.
The collapse of FTX last year raised concerns about the lack of consumer protection in the industry, prompting regulators worldwide to take action.
Latest in the Crypto Market
Despite facing regulatory challenges, the leading cryptocurrency, bitcoin, has demonstrated remarkable resilience.
Reuters reports that the coin's price has recently surged by 75% since the collapse of FTX, reaching $27,431 earlier this week. Even amidst the banking turmoil witnessed in the United States and Europe in March, bitcoin has consistently maintained a value above $26,000.
Starting June 1, the Hong Kong SFC will accept license applications from digital asset companies. This represents a significant milestone in Hong Kong's efforts to establish a strong regulatory framework for the crypto industry.
The primary objectives of this framework are to protect investors and foster responsible growth within the digital asset realm.
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