Hong Kong Plans to Allow Retail Investors to Trade Cryptocurrencies

On February 20, the Hong Kong Securities and Futures Commission (SFC) proposed new rules that would let retail investors trade certain “large-cap” cryptocurrencies on licensed exchanges. This move comes in contrast to mainland China’s strict crackdown on crypto trading.

The proposal focuses on “whether licensed platform operators should be allowed to provide services to retail investors” and “how to protect investors.” The regulatory requirements are open for consultation through March 31 and the new system will take effect on June 1.

While the regulator did not specify which large-cap cryptocurrencies would be allowed under this new proposal, a spokesperson said they would likely be Bitcoin and Ethereum, two of the biggest digital assets by market value.

“In light of the recent turmoil and the collapse of some leading crypto trading platforms around the world, there is a clear consensus among regulators globally for regulation in the virtual asset space to ensure investors are adequately protected and key risks are effectively managed,” said Julia Leung, the SFC’s Chief Executive Officer.

According to the SFC announcement, operators of virtual asset (VA) trading platforms that plan to apply for a license, including pre-existing platforms, should begin to review and prepare their systems for crypto trading. Meanwhile, those who do not plan to apply for a license should start preparing for an orderly closure of their business in Hong Kong. The SFC intends to publish a list on its website to inform the public of the licensure status of each VA trading platform, and will continue working with Hong Kong’s Investor and Financial Education Council to uphold public investor education.

The SFC suggests that licensed operators shall establish a token admission and review committee responsible for formulating, implementing, and enforcing the criteria for including virtual assets for trading, and notifying the operator of any proposed hard fork or airdrop.

Cryptocurrency entrepreneur Justin Sun tweeted that Huobi Global announced that it had applied for a crypto trading license in Hong Kong. In addition to seeking licensure, Huobi Global is planning to set up a local exchange called Huobi Hong Kong, which will operate under local regulations to offer a range of trading services to customers.

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Historically a financial hub, Hong Kong issued a policy on the development of virtual assets last year. The policy put forth a series of plans for oversight, investors, and property rights, as well as three “pilot projects”, namely, NFT issuance for Hong Kong Fintech Week, green bond tokenization, and e-HKD. Since then, it has approved a number of cryptocurrency ETFs.