Cryptocurrency trading platforms in Hong Kong must be licensed by June 1, 2023

Hong Kong’s Securities and Futures Commission (SFC) has launched consultations on whether to allow retail investors to invest in cryptocurrencies, and is making regulatory recommendations on crypto asset virtual asset trading platforms. The new licensing system will come into effect on June 1, 2023, requiring all virtual asset trading platforms in Hong Kong to be licensed by the Securities and Futures Commission.

According to the Securities and Contracts Regulations futures requirements for licensed stockbrokers and automated trading venues, regulatory requirements are imposed on virtual asset trading platforms. Strong investor protections have been proposed, such as suitability checks for client referrals and token acceptance.

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One of the points of discussion was whether licensed platform operators should serve retail investors, and if so, what measures should be taken to protect them. Individual investors will be allowed to trade larger coins on licensed exchanges as long as they are included in at least two approved investable indices obtained from independent providers, Bloomberg reported.

Gigi Leung, chief executive of the Securities Regulatory Commission, emphasized that the proposed regulations give priority to protecting investors, which is in line with the principle of “same risk, same rules in the same industry”. She also noted that global regulators support regulation of the virtual asset space to ensure investor protection, especially after the collapse of several crypto trading platforms.

Virtual asset trading platforms must review and revise their systems and controls to prepare for the new regime, and those who do not intend to apply for a license should prepare to close their Hong Kong operations. The consultation period will end on March 31, and the CSRC plans to publish the list on its website to let the public know about the legal status of virtual asset trading platforms. The SFC will also work with the Investor and Financial Education Council to strengthen investor education for the Hong Kong public.

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