Hong Kong’s SFC Creates New Regulations, But Might Hurt Newcomers from Entering Crypto Market


Of every place in the world, Asia is easily one of the most regulated continents for their crypto rulings. However, each country within it has a different way that they deal with the digital asset, and Hong Kong is just the latest country to make their determination. Unfortunately, the laws are fairly strict on the actions of traders and exchanges, considering recent information available from the Honk Kong Securities and Exchanges Commission (SFC). In fact, the regulations themselves may make it hard for crypto firms to operate at all, if the cost Is too high.

Much of the concern from the SFC has to do with the crypto-crime and money laundering that seems to be at a heightened level in Southeast Asia. This is why Hong Kong has taken a stricter approach to their regulations, despite having one of the least stringent stances in the whole region. However, their role as one of the world’s biggest economies gives them a responsibility to their citizens to protect them from the potential threats that come with the industry. One of the major areas that they are cracking down on it is the initial coin offering (ICO) sector.

In China, cryptocurrency has already been banned, so the decision for Hong Kong to stake their place is realistically a long time coming. Based on new rulings by the SFC, licenses are required for any investment fund that has at least 10% of their holdings in digital assets. Even with this qualification, the only way that companies can sell is with a professional investor. To help exchanges to figure out what classification they fall under, the SFC is considering a “temporary regulatory sandbox,” helping them to test out their digital assets to determine if a license should be sought out.

None of these regulations should come as a surprise to locals, considering that they’ve been warning the industry for quite a while that they would be easing into stricter laws. In February, there were seven individual exchanges that were warned by the SFC directly after multiple investor complaints.

The stricter regulations are both a positive and a negative change. Most investors would understand the need to protect their transactions, though others think that these decisions will ultimately have a negative impact on the crypto firms, costing much more to function. Discussing the negative side, Daisuke Yasaku of the Daiwa Institute of Research said,

“The cost of regulations will be high. The requirements of the SFC initiative may prove too burdensome for some operators.”

Still, Yasaku believes that these preventative measures are necessary, and that exchanges will need to maintain transparency as they undergo evaluations.

Ultimately, it comes down to a debate over costing more to protect investors, versus the price that could forced upon them in the event of cybercrime. The aggressive stance that Hong Kong takes now will need time to see if it works out in favor of the industry, or against it.

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