Hong Kong’s SFC Enacts Regulatory Framework for Digital Asset Buying and selling

• Hong Kong’s SFC unveils new rules for digital asset buying and selling platforms.
• Most respondents welcomed the proposed necessities.
• Failure to conform will outcome within the orderly closure of companies.

The Securities and Futures Fee (SFC), an unbiased statutory physique charged with regulating the securities and futures markets in Hong Kong, has launched its session conclusions on the proposed regulatory necessities for digital asset buying and selling platform operators licensed by the SFC. The SFC obtained 152 written submissions throughout the session, together with suggestions from trade associations, market members, and different stakeholders.

In line with SFC, most respondents welcomed the proposed necessities, with some searching for additional clarifications. The SFC has modified and clarified the proposed rules in response to the suggestions obtained.

One of many key facets of the proposal is the allowance for licensed buying and selling platform operators to serve retail traders, which obtained important assist from the respondents. The SFC will implement suitability checks throughout onboarding, enhanced token due diligence, improved governance, admission standards, and disclosures to guard these traders.

Julia Leung, the Chief Government Officer of the SFC, emphasised the significance of offering clear regulatory expectations to advertise accountable improvement. The excellent regulatory framework in Hong Kong follows the precept of “identical enterprise, identical dangers, identical guidelines” to make sure strong investor safety and handle key dangers, fostering sustainable progress and supporting innovation within the trade.

Efficient June 1, 2023, the rules for digital asset buying and selling platform operators will define varied necessities, together with secure custody of belongings, segregation of consumer belongings, avoidance of conflicts of curiosity, and cybersecurity requirements. The SFC will present extra steering on the brand new regulatory necessities, together with license utility procedures and transitional preparations.

The SFC encourages digital asset buying and selling platform operators keen to adjust to the regulatory requirements to use for a license. In line with the SFC, those that select not to take action are anticipated to proceed with an orderly closure of their enterprise in Hong Kong. Moreover, the SFC will proceed collaborating with the Investor and Monetary Schooling Council to coach traders in regards to the dangers of buying and selling on unregulated platforms.