Hong Kong All-In On Crypto: New Licensing Regime Allows Retail Investors To Trade Bitcoin, Ether

Hong Kong's Securities and Futures Commission (SFC) is set to unveil guidelines about the city's dynamic cryptocurrency framework in May, according to Chief Executive Officer Julia Leung.

The consultation process for the regulatory framework received an overwhelming response, with over 150 participants sharing their views on the matter, Leung said.

Hong Kong's vision is to establish a digital-asset center to enhance its reputation as a financial hub and "encourage the development of virtual asset trading platforms," Leung said, according to Bloomberg News.

The SFC recently proposed a new policy that would allow retail investors to trade large-cap cryptocurrency tokens through licensed virtual-asset platforms. This move aims to regulate and protect investors in cryptocurrency investment activities that have been unregulated in the past.

The new cryptocurrency regulatory regime will only allow "eligible large-cap virtual assets" to be offered to retail investors by licensed virtual-asset platforms. These virtual assets should be included in at least two acceptable indices issued by independent index providers.

The new regime is essential to ensure effective regulation and protect investors from losses due to the "increasing interconnectedness" between the virtual-asset market and the traditional financial system, the SFC stated.

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Exchanges will decide which cryptocurrency tokens retail investors can trade, and how much they can invest, while platforms will need to assess investors' knowledge and set exposure limits for customers depending on their financial situations.

Before offering cryptocurrency tokens to investors, platforms will need to consider various factors, including a virtual asset's management team, maturity, liquidity, and the security infrastructure of its blockchain protocol.

The platforms will also set up token admission and review committees that follow through with the SFC's admission criteria and make final decisions on whether to admit, halt, suspend, or withdraw offerings.

Hong Kong legalized retail access to cryptocurrency trading in 2022. In December, it passed the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill, introducing the new virtual-asset platform licensing regime.

After June 1, unlicensed cryptocurrency trading activity will be a criminal offense.

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