Hong Kong Market Watchdog to Ban Retail Investors & Regulate All Crypto Trading Platforms


Hong Kong’s market watchdog said on Tuesday that the city will now regulate all cryptocurrency trading platforms, including the overseas platforms targeting local investors operating in its financial hub, making a shift from its previous “opt in” approach.

According to South China Morning Post, with this, the aim is to ban retail investors from trading in cryptos and to end the unregulated trading of digital assets.

The consultation paper is planned to be released on Tuesday to collect views on the proposed new rules that aim for investor protection and combat fraud and money laundering, said Christopher Hui Ching-yu, the Secretary for Financial Services and the Treasury. Hui said in a statement on Tuesday,

“Simply speaking, we will require all virtual-asset trading platforms to be operating transparently, like working under the sunlight.

Under the proposed new regulatory regime, they must fit in with the licensing requirements of the SFC and must follow all the investor-protection and anti-money-laundering regulation.”

Last year, the Securities and Futures Commission (SFC) of Hong Kong launched a regulatory framework for crypto trading firms, which was restricted to only those platforms that were trading an asset officially categorized as security or future, reported Reuters. Ashley Alder, chief executive of the SFC, said in a speech on Tuesday,

“This is a significant limitation, as 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.”

Under the new licensing regime, it will be mandatory for all crypto trading platforms that operate in Hong Kong or target investors in the area to apply for an SFC license, said Alder.

The operators also have to make sure there are no retail investors trading on their platforms, and only professional investors with over HK$8 million (US$1.03 million) in assets are allowed, according to Clara Chiu, director of licensing and head of the fintech unit of the SFC.

The new licensing rule is in line with the Financial Action Task Force (FATF), of which Hong Kong is a member.

“This was going to happen at some point, so better sooner than later. I am sure the Bitmex. Other jurisdictions are likely to follow,” said an executive at the crypto fund, The Spartan Group.

There are currently dozens of crypto exchanges operating in Hong Kong; however, many have chosen not to apply for a license under the existing system.

In August, crypto firm OSL Digital Securities, a Fidelity-backed BC Group unit, received a SFC approval in principle to operate a crypto trading platform.

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