The Securities and Futures Commission (SFC) of Hong Kong has recently completed its consultation process regarding the provision of services to retail investors by licensed cryptocurrency exchanges. In an official announcement on its website, the regulatory body revealed that it will introduce guidelines for operators of virtual asset trading platforms, effective from June 1.
The SFC further disclosed that it will begin accepting applications for crypto exchange licensing on the aforementioned date. However, it emphasized that these trading platforms must adhere to the guidelines set out by the SFC in order to obtain the necessary licenses.
During the consultation process, the SFC received a total of 152 written submissions from professional associations, consulting firms, and market participants. After carefully considering the feedback, the majority of these firms expressed their support for the concept of allowing retail investors to engage in cryptocurrency trading on licensed exchanges.
To ensure the safety and integrity of the market, the SFC has proposed robust measures for licensed exchanges in Hong Kong. These measures include requirements such as secure custody of assets, segregation of client assets, prevention of conflicts of interest, and adherence to cybersecurity standards.
Additionally, the SFC stipulated that approved crypto exchanges must maintain a minimum capital reserve of 5,000,000 HK$ ($639,000). Licensed exchanges will also be required to submit monthly reports declaring their available capital, debit and credit statements, as well as profit and loss analysis to the SFC.
In order to protect investors from fraudulent projects, the SFC has mandated that tokens undergo a one-year performance analysis before being listed on any exchange. Even if a token has previously passed verifications on another platform, the SFC will conduct further checks before allowing its listing.
The regulator explicitly disapproves of third-party asset custody, citing concerns over its ability to effectively regulate and enforce compliance. The SFC has urged crypto exchanges that are unwilling to comply with the new rules to cease their operations in Hong Kong.