Hong Kong's New Regulation ‘Might’ Be Harmful for Local Crypto Industry, Experts Say

Published at: Dec. 17, 2018

New regulations for crypto-related companies, which Hong Kong’s Securities and Futures Commission (SFC) announced earlier , might prevent crypto entrepreneurs from entering the market. Expert comments on the situation were reported by business media Nikkei Asian Review on Monday, Dec. 17.

Timothy Loh, owner of a local law firm, told Nikkei that some entrepreneurs might decide not to participate in the new framework in order to "maintain their current shares in the market." “The requirements of the SFC initiative may prove too burdensome for some operators,” he added.

Other speakers cited by Nikkei believe that higher trading costs could discourage institutional investors from entering the market, which could work against the plans to stabilize markets with their presence. However, the counterargument is that a stricter policy may lead to greater investor confidence, Nikkei notes.

The SFC first announced the new regulatory framework in November. The guidelines compared cryptocurrency exchanges to existing licensed providers of automated trading services, pointing out that they also need to protect investors.

Moreover, the SFC has major concerns about money-laundering cases and fraud, which have prompted the regulator to introduce new legislation. It will likely be applied to exchanges, traders, investment funds and other crypto-related businesses.

Under the new guidelines, investment funds are obliged to obtain a license from the SFC in the event that more than 10 percent of their assets consist of Bitcoin (BTC) or other cryptocurrencies. Moreover, in this case, they will be allowed to sell products only to professional investors.

Before applying for a license, crypto entrepreneurs can participate in a “regulatory sandbox” to test their solutions.

The new regulation also refers to initial coin offerings (ICO), Nikkei reports. For example, all tokens have to fulfill the SFC’s requirements and are obliged to have existed for at least 12 months before an ICO is launched.

Hong Kong is known for its significantly more lenient approach toward cryptocurrencies in comparison to mainland China, which upholds an effective ban on crypto activities. According to a recent report published by CryptoCompare, the highest quantity of top exchanges is still located in Hong Kong (10) and Singapore (11).

Tags
Hong Kong
Bitcoin Regulation
Cryptocurrencies
Government
Ico
Related Posts
Hong Kong’s Securities Regulator Calls for Crypto Regulation to Confront Fraud
The Securities and Futures Commission (SFC) of Hong Kong has expressed concern over the lack of regulation for dealing with fraud in the crypto space, local news agency The Standard reports May 30. SFC enforcement chief Thomas Atkinson has recently pointed out problems associated with the existing regulatory uncertainty over initial coin offerings (ICOs) and cryptocurrency trading. Atkinson, who resigned from Canada’s largest securities enforcement authority, the Ontario Securities Commission (OSC), back in 2016, emphasized that the structure of certain crypto exchanges is “beyond the scope of the SFC,” the report notes. The official urged local lawmakers and authorities to …
Hong Kong / May 30, 2019
OTC crypto shops flood Hong Kong, but regulations may impact their presence
Hong Kong, one of the most significant and leading financial centers in the world, has played a large role in the development of cryptocurrencies. For instance, the Chinese territory has birthed some of the most established and successful crypto companies to date including the crypto derivatives exchange FTX, along with the digital asset platform Crypto.com. Yet, as trillions of dollars are traded regularly through crypto exchanges founded in Hong Kong, the “Vertical City” also contains an abundance of physical over-the-counter crypto shops as well. Henri Arslanian, PwC crypto lead and former chairman of the Fintech Association of Hong Kong, told …
Bitcoin / Oct. 24, 2021
US Congressmen Call on SEC for Regulatory Clarity Regarding Cryptocurrencies
A group of lawmakers from the U.S. Congress has sent a letter to Securities and Exchange Commission (SEC) Chairman Jay Clayton, calling for regulatory clarity regarding cryptocurrencies, CNBC reported September 28. According to CNBC, more than a dozen congressmen asked Clayton to tell investors how the SEC plans to regulate digital currency. The lawmakers requested clarity on the criteria for identifying digital tokens as “investment contracts” and therefore securities, in addition to a description of the tools the SEC will use to provide more concrete guidance to innovators in the field. The letter reads: "It is important that all policy …
United States / Sept. 29, 2018
Report: EU to Discuss Further Crypto Regulation Amid Concerns About Lack of Transparency
Economic and financial affairs ministers from the European Union’s (E.U.) 28 member states will reportedly hold an informal meeting on the challenges posed by digital assets and the possibility of tightening regulations, Bloomberg reported August 29. According to a draft note seen by Bloomberg, participants will discuss a general lack of transparency and the potential for cryptocurrency to be used for tax evasion, terrorist financing and money laundering at a September 7 meeting in Vienna, Austria. The European Securities and Markets Authority (ESMA) has previously warned customers about Initial Coin Offerings (ICOs), citing a lack of investor understanding and problems …
Bitcoin Regulation / Aug. 30, 2018
China Prohibits Crypto-Related Promotion in Beijing’s Chaoyang District
China is prohibiting all commercial venues from hosting any cryptocurrency-related events in Beijing’s Chaoyang district, local news outlet The Paper reported August 22. Official notice issued by local financial and social risk prevention and control authorities. Source: The Paper Many reportedly believe the ban, first covered by a local news app known as Jwview, could be extended to other districts as well, according to Cointelegraph correspondents in China. The correspondents further noted that Chinese media has conflictingly reported that the ban both does — and does not — apply to other areas in Beijing. As The Paper reports, the new …
China / Aug. 23, 2018