Hong Kong Regulator to Treat Crypto Traders Like Brokers Under New Procedures

Hong Kong’s securities watchdog is to take care of cryptocurrency trading platforms like classic brokers, in accordance to its next round of regulatory assistance for the marketplace.

The Securities and Futures Fee (SFC) released its place paper on digital asset exchanges Wednesday, asserting a new licensing scheme that it claimed is not dissimilar from the 1 used to Hong Kong’s stability brokers and automatic trading venues.

Under the new licensing circumstances, crypto exchanges can only offer solutions to “professional investors” as defined by the SFC. Corporations could also only alter solutions or providers subsequent acceptance by the regulator and have to have an present connection with an independent auditing company, submitting annual experiences on trade routines. Exchanges have to even more file regular monthly experiences to the fee.

Furthermore, any digital asset company trading at the very least 1 stability token falls underneath the regulator’s purview. Programs for peer-to-peer (P2P) exchanges – this sort of as decentralized exchanges (DEX) or non-custodial trade platforms – will not be reviewed by the SFC.

Warm wallets – crypto storage with stay connections to the world wide web – could not keep more than 2 p.c of an exchange’s overall money. While exchanges are mandated to have insurance for all assets in the occasion of a breach or hack, the SFC states.

Anti-revenue laundering (AML) and know-your-customer (KYC) treatments are cited as a main worry, with the SFC stating exchanges have to just take methods to “establish the legitimate and complete identity of just about every of its customers, and of just about every client’s monetary predicament, expense encounter and expense aims.”

On the granting of a license, firms enter into the SFC Regulatory Sandbox which the regulator claims delivers more exacting reporting and monitoring expectations.

The regulator also issued a warning Wednesday to providers of cryptocurrency-based mostly futures solutions targeting Hong Kong citizens with no the suitable paperwork. The SFC claimed it “has not licensed or authorised any human being in Hong Kong to offer or trade digital asset futures contracts” to day and stays “unlikely to grant a licence or authorisation to carry on a small business in this sort of contracts.”

Crypto by-product providers like BitMEX and OKEx already limit access to their solutions in Hong Kong.

Handed in November 2018 and up to date this Oct, the SFC’s initial crypto licensing scheme, regarding money that spend 10 p.c or more of their portfolios in crypto, has only specified the environmentally friendly light to 1 fund in the previous calendar year.

Hong Kong impression by means of Shutterstock