Hong Kong’s crypto-regime in place by June 1

The Hong Kong Securities and Futures Commission is ready to issue licenses to virtual-asset trading platforms. Operators who do not intend to apply for licenses must wind down their operations.

Photo by Kuang Da

Photo by Kuang Da

By SIMA Linwei


The Hong Kong Securities and Futures Commission (SFC) has declared that it supports licensing retail crypto-trading platforms.

Consultation over new rules for virtual-asset trading platforms in Hong Kong ended in March, with respondents generally supportive of the proposals. A new regime will regulate cryptocurrency trading from June 1.

Investor protection, risk management

Julia Leung Fung-yee, CEO of the SFC, said clear rules were essential for responsible development: “Hong Kong’s comprehensive framework for regulating virtual assets aims to provide investor protection and manage risks.”

No platform has been approved to provide services to retail investors at present, and most of the virtual-asset trading platforms accessible to the public are not regulated by the SFC.

Two cryptocurrency companies hold licenses to trade in Hong Kong, though not ovetr-the-counter: OSL Exchange and Hashkey. They too will need to apply for new VASP licenses, but a simplified application process will be applicable.

The SFC welcomed platform operators who are ready to apply for licenses. As for operators who do not intend to apply for licenses, the SFC requested that they wind down their operations in Hong Kong in an orderly manner.

No proprietary trading

Hong Kong is friendly to the cryptocurrency field and now has high regulatory certainty, adopting a gradual approach to liberalization. Retail trading in stablecoins, cryptocurrencies pegged to other assets, will not be allowed until other planned regulations take effect.

In addition, regarding proprietary trading, the SFC has agreed to allow third-party market-making. However, the current prohibition on proprietary trading is comprehensive, even prohibiting licensed virtual-asset trading platforms from holding any virtual asset positions. The SFC has amended the “Virtual Asset Trading Platforms Guideline” to allow affiliated entities to conduct program trading through other channels.

Potential conflicts of interest

Regarding other common services in the asset market, virtual-asset trading platforms are not allowed to provide any services beyond acting as agents. Any other activities may give rise to conflicts of interest and require additional safeguards.

In other words, Hong Kong has provided a compliant regulatory path for cryptocurrency trading platforms, but certain kinds of trading platforms that grew unchecked will not be allowed. As for retail investors, they will have the opportunity to trade fully legally.